Are closing costs avoided with a VA loan?
Not avoided, but limited and often shifted. The VA restricts certain fees a veteran may pay and prohibits others outright. Sellers may pay all of the buyer's loan costs plus up to 4% in concessions, and lender credits can cover more. Many Utah veterans close with very little out of pocket, but the costs still exist and appear on the closing disclosure.
Not avoided, but limited and often shifted. The VA restricts certain fees a veteran may pay and prohibits others outright. Sellers may pay all of the buyer's loan costs plus up to 4% in concessions, and lender credits can cover more. Many Utah veterans close with very little out of pocket, but the costs still exist and appear on the closing disclosure.
Detailed answer
VA rules divide closing costs into what a veteran may pay, what the veteran may not pay, and what someone else must therefore absorb. Allowable buyer costs include the appraisal, credit report, title and recording, survey where required, prepaid taxes and insurance, and a limited origination charge. Non-allowable costs — sometimes called unallowable fees — include certain lender processing and underwriting charges, attorney fees for the lender's benefit, and brokerage commissions. Those must be paid by the seller, the lender through a credit, or the agent. Separately, a seller may contribute up to 4% of the value in concessions, which can cover prepaid items, the funding fee, or even debt payoff to help the veteran qualify. Stacking allowable seller-paid costs with a 4% concession and a lender credit is how many Utah veterans reach a near-zero cash-to-close position. None of that makes the costs disappear; it reallocates them, and the allocation is negotiated in the purchase contract, not at the closing table.
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