VA Loan Costs: Funding Fee, Closing Costs, and What to Expect

VA loans don't cost zero. They cost a lot less than conventional -- but you still need to know where the money goes.

Here's every dollar you'll pay (and a few tricks to pay nothing out of pocket).

The VA Funding Fee

The VA charges a one-time funding fee to keep the program running. It's not paid upfront -- it gets rolled into your loan balance.

2026 Funding Fee Rates

Scenario	First-Time Use	Subsequent Use
No down payment	2.15%	3.3%
5-9.99% down	1.5%	1.5%
10%+ down	1.25%	1.25%

Real example: On a $600,000 loan with no down payment (first-time use), your funding fee is $600,000 x 2.15% = $12,900. Your loan balance becomes $612,900.

Put 10% down and that fee drops to 1.25%. But the whole point of VA is the zero-down option, so most veterans skip the down payment and finance the fee.

Who's Exempt?

You pay $0 funding fee if you're:

• Receiving VA disability compensation
• Entitled to disability but taking retirement pay instead
• A surviving spouse receiving DIC

This exemption saves thousands. Make sure your lender knows your disability status before closing.

Pro tip: If you're waiting on a disability rating decision, close with the funding fee included. Once your rating comes through, request a refund from the VA. Don't delay your purchase waiting for paperwork.

VA Closing Costs

Beyond the funding fee, you'll pay standard closing costs -- but the VA limits what lenders can charge you.

Allowed costs (you pay these):

• VA appraisal: $500-$800
• Credit report
• Title insurance
• Recording fees
• Origination fee (capped at 1% of the loan)
• Prepaid property taxes and insurance

Prohibited costs (lenders can't charge you):

• Attorney fees
• Loan processing fees
• Underwriting fees
• Document preparation fees

If a lender tries to charge you a prohibited fee, that's a violation. Report it to the VA.

Total closing costs on a typical California VA purchase: $10,000-$18,000, depending on the loan amount and county.

For more on what California buyers pay at closing, read closing costs explained.

How to Close with $0 Out of Pocket

It's possible. Here's how veterans do it.

Seller Concessions

Sellers can contribute up to 4% of the purchase price toward your closing costs.

On a $650,000 home, that's $26,000 in seller credits. If your closing costs are $15,000, the seller covers everything.

In a buyer's market, ask for concessions. If the home's been sitting or needs minor work, you've got room to negotiate. In competitive markets, be strategic -- asking for 4% in credits can weaken your offer against other buyers.

Stack with Down Payment Assistance

You can combine VA financing with California DPA programs.

CalHFA MyHome + VA example:

• VA loan: $0 down
• CalHFA MyHome: 3.5% for closing costs
• CalHFA ZIP: $10,000 additional

On a $650,000 home, CalHFA could cover $32,750 in costs. Combined with zero down, that's $0 out of pocket.

See all California down payment assistance programs

VA vs. Conventional: Cost Comparison

Here's a side-by-side on a $600,000 purchase:

Cost	VA Loan	Conventional (5% down)
Down payment	$0	$30,000
Funding fee / PMI	$12,900 (financed)	$250-$500/month PMI
Closing costs	~$12,000	~$15,000
Cash needed at closing	~$12,000	~$45,000

The VA buyer needs $33,000 less cash. And once PMI is factored in over 5-10 years, the VA loan saves $15,000-$60,000 more on top of that.

More in This Series

• VA Loans in California: The Basics -- overview and key benefits
• VA Loan Eligibility: Who Qualifies and How to Get Your COE -- service requirements and COE process
• VA Loan Types: Purchase, Refinance, IRRRL, and Cash-Out -- every VA loan option

Get your free VA loan quote to see your exact costs.

Better Offers Inc | CA DRE #01212512
VA-Approved Lender | Serving California Veterans Since 2011