Do Disabled Veterans Pay Closing Costs on VA Loans? What You Need to Know

If you’re a disabled veteran looking to purchase a home, you might have heard that VA loans eliminate closing costs entirely. While these loans do offer substantial benefits, including no down payment requirements and competitive interest rates, they don’t automatically wipe out all closing costs—even for disabled veterans.

That said, disabled veterans—particularly those with 100% service-connected disabilities—do receive significant advantages that can substantially reduce the financial burden of buying a home.

What Closing Costs Can You Expect with a VA Loan?

Before diving into specific benefits for disabled veterans, let’s understand what closing costs typically include:

The VA Funding Fee Exemption: A Major Benefit for Disabled Veterans

The most significant financial advantage for disabled veterans comes in the form of the VA funding fee exemption. This fee—which typically ranges from 1.4% to 3.6% of the loan amount, depending on your down payment and whether it’s your first VA loan—can be completely waived if you:

• Have a service-connected disability rating of 10% or higher
• Are receiving VA compensation for a service-connected disability
• Would be entitled to receive compensation if you weren’t receiving retirement or active duty pay
• Are a surviving spouse of a veteran who died in service or from a service-connected disability

For perspective, on a $300,000 home loan, this exemption could save you $4,200 to $10,800—a substantial amount that effectively serves as a “thank you” for your sacrifice.

Beyond the Funding Fee: Other Closing Costs for Disabled Veterans

While the funding fee exemption is significant, it doesn’t eliminate all closing costs. Disabled veterans still need to cover expenses like:

1. Appraisal fees: Required to determine the home’s value
2. Title insurance: Protects against ownership claims
3. Recording fees: Charged by local governments to record the deed
4. Lender fees: Charged by the mortgage company for processing

However, VA loans do provide some regulations that help control these costs. For example, VA guidelines limit certain fees that lenders can charge, helping keep overall closing costs more reasonable than conventional loans.

Strategies for Reducing Closing Costs as a Disabled Veteran

Just because you’re responsible for some closing costs doesn’t mean you can’t minimize them. Consider these approaches:

1. Negotiate with the Seller

VA guidelines allow sellers to contribute up to 4% of the purchase price toward your closing costs. In buyer’s markets, this can be a powerful negotiating tool.

2. Roll Eligible Closing Costs into Your Loan

Some closing costs can be included in your loan amount, reducing your out-of-pocket expenses at closing. While this means paying interest on these costs over time, it can help if cash flow is a concern.

3. Ask About Lender Credits

Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate. This trade-off might make sense depending on how long you plan to stay in the home.

4. Explore State and Local Benefits

Many states offer additional benefits for disabled veterans, including property tax exemptions or grants that can be applied to closing costs. Check with your state’s veterans affairs office for programs specific to your area.

Special Considerations for Veterans with 100% Disability Ratings

Veterans with a 100% service-connected disability rating often qualify for additional benefits beyond the VA funding fee exemption. These might include:

• Property tax exemptions in many states
• Potential eligibility for grants like the Specially Adapted Housing (SAH) grant if your disability requires home modifications
• Priority processing of your loan application with many VA-approved lenders

How to Verify Your Funding Fee Exemption Status

To ensure you receive your funding fee exemption, you’ll need a Certificate of Eligibility (COE) that indicates your disability status. You can obtain this through:

• The VA eBenefits portal
• Your VA-approved lender
• Your regional VA office

Having this documentation ready before you begin the home-buying process will streamline your loan approval.

Common Questions About Closing Costs for Disabled Veterans

Can closing costs be included in the VA loan amount?

Yes, some closing costs can be rolled into your loan, though this increases your loan amount and monthly payments. Typically, these include the VA funding fee (for those who aren’t exempt), origination fees, and discount points.

Is it possible for the seller to pay a portion of the closing costs on a VA loan?

Absolutely! Sellers can contribute up to 4% of the home’s purchase price toward “concessions,” which include closing costs. This is a common negotiation point in many VA loan transactions.

What should I ask my lender about closing costs on a VA loan?

Request a detailed breakdown of all anticipated closing costs, ask which costs might be waived or reduced based on your disability status, and inquire about lender-specific programs for disabled veterans. Also, ask about their experience working with disabled veterans, as some lenders have specialized programs.

Are there any additional benefits for disabled veterans regarding closing costs?

Beyond the funding fee exemption, some lenders offer special programs or fee reductions for disabled veterans. Additionally, various state and local programs might provide grants or assistance specifically for disabled veterans.

Where to Find Expert Guidance

Navigating VA loans and closing costs can be complex. For personalized guidance, consider these resources:

• U.S. Department of Veterans Affairs: Official VA Home Loans site
• VA Regional Loan Centers: Provide direct assistance with VA loan questions
• Veterans Service Organizations: Organizations like the DAV (Disabled American Veterans) often offer free financial counseling
• VA-Approved Lenders: Look for lenders with specific experience serving disabled veterans

Final Thoughts: Making an Informed Decision

While disabled veterans aren’t completely exempt from all closing costs on VA loans, the benefits—particularly the funding fee exemption—can significantly reduce the financial burden of purchasing a home. By understanding what costs to expect and leveraging strategies to minimize those expenses, you can make the most of your hard-earned VA loan benefit.

Remember that as a disabled veteran, you’ve earned these benefits through your sacrifice and service. Don’t hesitate to ask questions, negotiate terms, and seek out additional assistance programs that may be available to you.

Have you used a VA loan as a disabled veteran? Share your experience in the comments below to help fellow veterans navigate their home-buying journey.