Can You Roll VA Loan Closing Costs Into the Loan? Here Is How It Works

Last updated April 12, 2026 by Tim Stacey, Stacey Solutions powered by Xpert Home Lending, Inc NMLS 2179191.

What You Can and Cannot Finance Into a VA Loan

The VA funding fee is the only closing cost that can be directly added to your loan balance. On a $600,000 purchase, the first-use funding fee of 2.15 percent is $12,900. Financing it means your loan amount becomes $612,900 instead of $600,000. Your monthly payment increases slightly, but you do not pay the fee out of pocket at closing.

Standard closing costs like the appraisal fee, title insurance, escrow fees, recording fees, and prepaid items (property taxes and homeowners insurance) cannot be added to the loan balance. These must be paid at closing from your own funds, seller credits, or lender credits.

Energy-efficient improvement costs can also be financed into a VA loan, up to $6,000 for approved energy upgrades to the property. This is a niche provision that most buyers do not use, but it is available.

Using Seller Credits to Cover Closing Costs

VA loans allow sellers to contribute up to 4 percent of the purchase price toward the buyer’s closing costs and prepaid items. On a $500,000 home in Solano County, that is up to $20,000 the seller can pay on your behalf.

Seller credits are negotiated as part of your purchase offer. In a balanced or buyer-friendly market, many sellers are willing to contribute toward closing costs to make the deal work. In a highly competitive market, asking for seller credits can make your offer less attractive compared to offers that ask for nothing.

Your real estate agent and I work together to determine the right amount to request based on current market conditions in your target neighborhood. In Vacaville, Fairfield, and Suisun City, the dynamics can vary significantly from one neighborhood to another.

Using Lender Credits to Reduce Out-of-Pocket Costs

A lender credit is money the lender gives you at closing to offset your closing costs. In exchange, you accept a slightly higher interest rate. This is a legitimate and common strategy for VA buyers who want to minimize cash at closing.

For example, instead of a 6.25 percent rate with no lender credit, you might choose a 6.50 percent rate that comes with a $5,000 lender credit toward your closing costs. Your monthly payment increases by about $75 on a $500,000 loan, but you save $5,000 at the closing table.

Whether this trade-off makes sense depends on how long you plan to keep the loan. If you expect to refinance or sell within a few years, the lender credit saves you money. If you plan to stay 10 or more years, the lower rate saves more in the long run.

What VA Closing Costs Typically Look Like

On a Solano County VA purchase, typical closing costs include the VA appraisal fee ($600 to $800), title insurance ($1,500 to $3,000 depending on loan amount), escrow and closing fees ($1,500 to $2,500), recording fees ($100 to $300), and prepaid items like property taxes and homeowners insurance ($3,000 to $6,000 depending on timing).

The VA also limits what lenders can charge veterans. Origination fees are capped at 1 percent of the loan amount, and certain junk fees like attorney fees and processing fees that some lenders charge on conventional loans are not allowed on VA transactions.

Total closing costs on a $500,000 VA loan in Solano County typically run $8,000 to $15,000 before the funding fee. With the funding fee financed and a combination of seller and lender credits, many buyers bring $2,000 to $5,000 or less to the closing table.

The Zero-Down, Low-Cash-to-Close Reality

When I say VA loans allow zero down payment, that does not mean zero cost at closing. There are always some closing costs. But between financing the funding fee, negotiating seller credits, and using lender credits, it is possible to close a VA loan with very little out-of-pocket expense.

For active-duty families at Travis AFB who may not have large savings, this structure makes homeownership accessible without the years of saving that conventional loans often require. I structure every VA loan to minimize cash to close based on each buyer’s specific situation and the terms of their purchase contract.

Frequently Asked Questions

Is it better to pay the VA funding fee upfront or finance it?

Financing the funding fee increases your loan balance and total interest paid over time, but keeps cash in your pocket at closing. If preserving cash reserves is important, financing makes sense. If you have the funds and want the lowest possible monthly payment, paying upfront is the better financial move.

Can the seller pay my VA funding fee?

Yes. The VA funding fee is an eligible expense under the seller’s 4 percent concession allowance. If seller credits cover enough of your other closing costs, they can also cover the funding fee instead of you financing it.

Do disabled veterans still have closing costs?

Veterans with a 10 percent or higher disability rating are exempt from the VA funding fee, which is the single largest fee on most VA loans. All other closing costs still apply, but without the funding fee, the total amount due at closing is significantly reduced.

What if seller credits exceed my closing costs?

Excess seller credits cannot be given to you as cash. They can only be applied to closing costs and prepaid items. If the seller credits exceed your actual costs, the excess is typically reduced. Your lender and agent will structure the credits to match your actual closing costs as closely as possible.

Can I finance closing costs on a VA refinance?

On a VA IRRRL, you can roll the funding fee and closing costs into the new loan balance as long as you do not exceed the original loan amount by more than the costs and the net tangible benefit test is met. On a VA cash-out refinance, closing costs come from the new loan proceeds, effectively being financed into the new balance.

Let Me Show You the Real Numbers

Every VA transaction is structured differently. I build a detailed closing cost estimate for every client that shows exactly what you will pay, what the seller and lender cover, and what your total cash to close will be. If you are buying in Vacaville, Fairfield, Suisun City, or anywhere in Solano County, reach out and I will put the numbers together for your specific situation.