Separate required costs from the purchase down payment
The buyer may face lender fees, the VA appraisal, prepaid insurance, initial escrow deposits, title and settlement charges and earnest money adjustments. Some expenses can be paid by the seller or other permitted parties, while allowable fees and financing options depend on the transaction. A borrower also may owe a VA funding fee unless eligible for an exemption. The funding fee has different financing rules from typical closing costs on a VA purchase.
- Ask for a current itemized loan estimate
- Confirm funding-fee exemption status before pricing
- Budget prepaids and initial escrow funding separately
Distinguish closing-cost payments from concessions
VA rules permit negotiations over many normal buyer closing expenses and separately limit certain concessions, such as payment of the buyer's funding fee or qualifying debt balances. The frequently repeated percentage limit does not apply identically to every closing charge. Have a VA-experienced loan team categorize each requested seller-paid item correctly. Avoid drafting an offer based on a single generalized percentage without reviewing the contract and the official VA categories.
- Ask which seller-paid items count as VA concessions
- Keep the contract credit language compatible with lender instructions
- Recheck the estimated closing costs after insurance quotes arrive
Use written numbers to choose the offer structure
A lower price and a higher price with seller-paid costs can produce different financing results, especially when an appraisal or property eligibility is uncertain. Work with your agent and lender to compare total funds needed, financed balance, estimated payment and net concessions. Credit that exceeds eligible costs may not produce cash back to the buyer. Be prepared for the final Closing Disclosure to differ from early informal estimates.
- Compare the net economic effect of price and seller credit
- Confirm the credit fits eligible costs and appraisal value
- Review the closing worksheet before changing contract terms
Official information
Terms, loan rules, funding and eligibility can change. These references are for education; always confirm the current written terms with the appropriate agency and lender.
VA — Funding fee and closing costs ↗