Does the seller have to pay my closing costs on a VA loan?
By Kyle Melvin · NMLS #1486450 · REV Mortgage ·
Short answer
No. Nothing in the VA program requires a seller to pay a buyer's closing costs; that is negotiated in the contract like any sale. What VA does is limit what the buyer can be charged — a lender's flat fee is capped at 1% of the loan, and certain 'non-allowable' costs cannot be charged to the veteran at all — and cap seller concessions at 4% of the value for things beyond ordinary closing costs. The persistent belief that sellers must pay is why some listing agents avoid VA offers, and it is wrong.
Two separate rules get blended into one myth here. The first is the 1% rule: under the VA Lenders Handbook, a lender may charge the veteran a flat fee of up to 1% of the loan amount to cover its origination costs, and if it does, it cannot also charge a list of itemized "non-allowable" fees to the veteran. Those non-allowables — lender attorney fees, settlement or escrow fees, document preparation, notary, and similar — have to be paid by someone else (the seller, the lender, or a credit) or not charged at all. That is a cap on what the buyer pays, not a requirement that the seller pay it.
The second is the 4% seller concession cap. VA lets the seller pay all of the buyer's ordinary closing costs and prepaids without limit, but caps concessions — extras like paying the funding fee, paying off the buyer's collections, or funding prepaid items well beyond the norm — at 4% of the reasonable value. That is more generous than most conventional programs, not less.
So a VA buyer can write an offer with no seller-paid costs, some, or all. Whether the seller agrees is negotiation. What a listing agent needs to hear is on the VA loan guidelines page and, once it publishes, the myths page: the buyer can pay their own allowable costs, the appraisal is a safety floor most homes meet, and the escape clause protects the buyer's deposit without forcing the seller to reduce price. The funding fee can be financed, which is how most buyers handle the largest single cost.
Questions people also ask
- What are VA non-allowable fees?
- Costs the veteran cannot be charged when the lender charges the 1% flat fee — items like attorney fees for the lender, escrow or settlement fees, document preparation and similar. Someone else pays them or they are absorbed.
- What counts toward the 4% seller concession cap?
- Things beyond normal closing costs and prepaids: paying the funding fee, paying off the buyer's debts, prepaid taxes and insurance beyond the norm. Ordinary closing costs and prepaids do not count. Discount points and temporary buydown funds do count when they exceed what is reasonable for the market — VA leaves that judgment to the lender.
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