When you get a mortgage backed by the U.S. Department of Veterans Affairs (VA), you usually save some money. VA loans typically come with lower interest rates. There’s no mortgage insurance requirement. And, perhaps best of all, you can get one with 0% down.

That doesn’t mean you can get your keys without handing over any money at all, though. You’ll still need to pay closing costs. With a VA loan, those include money you owe the VA, the lender, and third parties. 

What to expect with VA closing costs

Expert estimates vary, but most folks say that VA closing costs come out to an average of 2–6% of your total loan amount. If you’re borrowing $400,000, for example, you’d probably need to have somewhere between $8,000 and $24,000 ready to hand over at closing. 

Even with 0% down, then, you need to pay some cash to get into your house. 

This all applies to refinancing, too. You might have lower costs — especially if you choose an interest rate reduction refinance loan (IRRRL) — but you’ll still likely owe some money at the closing table. 

To help you budget, let’s look at the closing costs that typically come with VA loans. 

The big one: The VA funding fee

For the majority of buyers, the biggest one-time cost that comes with VA loans is the funding fee. 

The VA requires the funding fee on all of the loans and refinances it backs. Collecting this fee helps to keep the VA’s loan program operating for future veterans and service members.

Your VA funding fee depends on how much you’re borrowing and the kind of VA loan you’re getting. It gets calculated as a percentage of your loan amount:

• 0.5%: People getting an IRRRL or Native American Direct Loan refinance
• 1.25%: VA purchase loan users putting 10% or more down, Native American Direct Loan users
• 1.5%: VA purchase loan users putting 5–9.99% down
• 2.15%: First-time VA purchase loan users putting less than 5% down, first-time VA loan users getting a cash-out refinance
• 3.3%: Repeat VA purchase loan users putting less than 5% down, repeat VA loan users getting a cash-out refinance

If you’re borrowing $400,000 with 0% down and it’s your first time getting a VA loan, for example, your VA funding fee would be $8,600 ($400,000 × 0.0215). 

You don’t to pay the VA funding fee at the closing table

The VA funding fee is a one-time upfront requirement to get a VA loan, which technically makes it a closing cost. But while you need to commit to paying the fee upfront, you don’t necessarily need to hand over all of that cash. 

The VA lets borrowers roll the funding fee into their loan amount. In the previous example, you’d borrow $408,600 if you went this route. 

There’s one thing you should know here. Rolling your funding fee into your mortgage means paying interest on it. That costs you more overall. 

Origination fee

Lenders don’t offer VA loans or refinances for free. Sure, they make money off the interest you pay. But they also want to make some money upfront to cover all the work they did to make sure you can afford what you’re borrowing (i.e., originate your loan). They call that an origination fee. 

Fortunately, the VA sets a ceiling on how much lenders can charge here. They aren’t allowed to charge origination fees above 1%. For a $400,000 VA loan, that means the maximum you’d need to pay for origination would be $4,000. 

Discount points

Mortgage discount points give you a way to buy a lower interest rate. Usually, each point costs 1% of your loan amount and lowers your rate by 0.25%. 

You don’t have to pay for points. But if you decide you want to tap into this way to get a lower mortgage rate, you’ll have to pay for any points you buy at closing. 

Third-party fees

You, your lender, and the VA aren’t the only groups involved in your VA loan. There’s also a professional appraiser, a title search company, an escrow company, and others. And you typically need to pay for all of these services. 

How you go about that depends on if you’re buying or refinancing:

• Buying: You might be able to get the seller to cover some of these closing costs. The VA calls these seller’s concessions and lets you get them for up to 4% of the home’s reasonable value. You can find that on the VA Notice of Value that your lender gave you. 
• Refinancing: You’ll typically still need an escrow account and a title search, but some of the other third-party costs can fall away. If you get an IRRRL, for example, you won’t need an appraisal. 

A quick note about prepaids

On top of your closing costs, you might have some extra money due at closing. These are called prepaids. 

If you’re going to close in the middle of the month, for example, you’ll need to prepay your interest until your first mortgage payment on the first of the following month. You usually also need to pay your annual homeowners insurance premium. And property taxes will typically be due, but they’ll be prorated based on how much of the year you’ll have ownership. 

Closing costs and prepaids don’t have to — and shouldn’t — come as a surprise at closing. The loan estimate you get from your lender lays out everything you’ll need to pay at the closing table.

With the ability to roll your funding fee into your mortgage, the closing costs with a VA loan can be relatively low. If you want to get a better idea of what this kind of mortgage would cost you, start comparing VA loan rates today.