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Everything You Need to Know About VA Loan Closing Costs

What you'll learn: Types of VA loan closing costs, buyer and seller costs, VA loan funding fee

 

EXPECTED READ TIME: 6 MINUTES

Documentation

August 25, 2023

VA loans, sponsored by the Department of Veterans Affairs, boast multiple benefits, including the potential for reduced closing costs. This comprehensive guide aims to demystify everything about VA loan closing costs.

What are mortgage loan closing costs?

Mortgage loan closing costs include fees charged for various services performed during the home buying process. These fees include loan origination fees, appraisal fees, title searches, title insurance, and escrow deposits, among others. These costs facilitate a seamless transition of property ownership, making them a critical part of the mortgage process.

VA mortgage closing costs, while sharing similarities with those of conventional mortgages, include unique costs like the VA funding fee. Understanding these specific costs can equip you to navigate the VA loan process more effectively, making you a savvy buyer.

Do VA loans have closing costs? What are they?

Indeed, VA loans have closing costs. These costs cover a variety of expenses encountered during the home buying journey. For VA loans, these costs include the VA funding fee, a mandatory charge unique to VA loans. Other costs may include appraisal and inspection fees, title insurance, credit report fees, and other processing fees.

An essential part of VA loans is the loan origination fee. This charge by the lender covers the services involved in preparing and servicing the loan. This fee, however, is capped at one percent of the loan amount, ensuring that VA loan borrowers are adequately protected.

What is the VA loan funding fee?

The VA loan funding fee is a one-time charge payable to the Department of Veterans Affairs. This fee is aimed at offsetting the loan's cost to taxpayers, given that VA loans don't require down payments or private mortgage insurance. Interestingly, this fee can be rolled into the loan, easing the initial financial burden on the borrower.

Importantly, some borrowers are exempt from this funding fee. These include veterans receiving VA disability compensation and surviving spouses of veterans who died in service or from service-related injuries.

Who pays VA loan closing costs? How much are they?

Both the buyer and seller share VA loan closing costs, but the division of these costs is often negotiated between the parties. The VA puts a limit on the costs a veteran buyer can pay, but does not cap what the seller can contribute, possibly easing the buyer's financial burden.

These costs typically range from one percent to five percent of the loan amount, depending on various factors such as the state of purchase, transaction specifics, and the lender. Each lender may offer different closing costs, emphasizing the importance of shopping around before settling for a lender.

How can I save money on my VA loan closing costs?

Several strategies can help lower your VA loan closing costs. One method involves seller concessions, where the seller agrees to pay part or all of the buyer’s closing costs. In VA loans, sellers can pay all of a buyer’s loan-related closing costs and up to four percent in concessions.

Lender credits offer another way to reduce costs. Here, the lender can offset some of your costs in exchange for a higher interest rate on your loan. Plus, closing costs can be rolled into VA loans, reducing the immediate cash outlay at closing.

Further considerations for VA loans

Remember that VA loan fees can be paid by the buyer or seller, which can provide significant savings for buyers. However, these costs will vary depending on a range of factors, including the specifics of the purchase and the lender you choose.

If you’re refinancing with a VA loan, remember that these, too, come with closing costs. They apply similarly to those in the initial mortgage. Such costs can include appraisal fees, origination fees, and credit report fees, among others. But remember, these costs can be rolled into the refinancing loan, reducing the immediate financial burden.

Navigating VA loan closing costs doesn't have to be daunting. With the right information and a reliable partner, you can make the most of your VA loan benefits and move one step closer to your dream home. We're here to ensure your journey to homeownership is less taxing and more rewarding.

Our VA Loan eBook can guide you through the process step by step. Download it here.

For more information about PenFed Mortgages:

PenFed Mortgage:

800-970-7766

Apply Now

SIMILAR ARTICLES

a pen filling out formWhat Is a VA Loan?

Discover the basics of a VA loan. You'll learn about who's eligible and the requirements, including how to get a COE, the benefits of this type of home loan, and how to apply.

flag beside a houseWhat Are the Benefits of a VA Loan?

If you are looking to buy a home, a VA loan can be a great option. Some of the benefits of VA loans include no down payment and no insurance.

man looking at computerWhat Is a VA Loan Funding Fee?

Whether you’re purchasing or refinancing using a VA loan, you'll have a funding fee for first-time and subsequent uses. Find out what this fee is, how much it costs, and any exemptions.

man looking at laptopWhat Is a Closing Disclosure?

A closing disclosure is an important document you'll receive three days before you close your loan. Understanding how to read it will help you double-check the specifics of your mortgage.

Current Interest Rates
Conventional Fixed

6.25% (6.457% APR)1

FHA Fixed

5.75% (6.634% APR)2

VA Fixed

5.75% (6.038% APR)3

Jumbo Fixed

6.125% (6.283% APR)4

Personalized Rates and Fees
Talk to a Home Loan Expert

Disclosures

1Conventional Loans

Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.375 discount point, which equals 1.375 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.

2FHA Loans

Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.

3VA Loans

Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

Rates quoted require a loan origination fee of $995.

4Jumbo Loans

Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.375 discount point, which equals 1.375 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 7.875% for primary residences and second homes.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

This credit union is federally insured by the National Credit Union Administration. Rates are current as of June 2025 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate