VA loans don't cost zero. They cost a lot less than conventional -- but you still need to know where the money goes.
Here's every dollar you'll pay (and a few tricks to pay nothing out of pocket).
The VA Funding Fee
The VA charges a one-time funding fee to keep the program running. It's not paid upfront -- it gets rolled into your loan balance.
2026 Funding Fee Rates
| Scenario | First-Time Use | Subsequent Use |
|---|---|---|
| No down payment | 2.15% | 3.3% |
| 5-9.99% down | 1.5% | 1.5% |
| 10%+ down | 1.25% | 1.25% |
Real example: On a $600,000 loan with no down payment (first-time use), your funding fee is $600,000 x 2.15% = $12,900. Your loan balance becomes $612,900.
Put 10% down and that fee drops to 1.25%. But the whole point of VA is the zero-down option, so most veterans skip the down payment and finance the fee.
Who's Exempt?
You pay $0 funding fee if you're:
- Receiving VA disability compensation
- Entitled to disability but taking retirement pay instead
- A surviving spouse receiving DIC
This exemption saves thousands. Make sure your lender knows your disability status before closing.
Pro tip: If you're waiting on a disability rating decision, close with the funding fee included. Once your rating comes through, request a refund from the VA. Don't delay your purchase waiting for paperwork.
VA Closing Costs
Beyond the funding fee, you'll pay standard closing costs -- but the VA limits what lenders can charge you.
Allowed costs (you pay these):
- VA appraisal: $500-$800
- Credit report
- Title insurance
- Recording fees
- Origination fee (capped at 1% of the loan)
- Prepaid property taxes and insurance
Prohibited costs (lenders can't charge you):
- Attorney fees
- Loan processing fees
- Underwriting fees
- Document preparation fees
If a lender tries to charge you a prohibited fee, that's a violation. Report it to the VA.
Total closing costs on a typical California VA purchase: $10,000-$18,000, depending on the loan amount and county.
For more on what California buyers pay at closing, read closing costs explained.
How to Close with $0 Out of Pocket
It's possible. Here's how veterans do it.
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Seller Concessions
Sellers can contribute up to 4% of the purchase price toward your closing costs.
On a $650,000 home, that's $26,000 in seller credits. If your closing costs are $15,000, the seller covers everything.
In a buyer's market, ask for concessions. If the home's been sitting or needs minor work, you've got room to negotiate. In competitive markets, be strategic -- asking for 4% in credits can weaken your offer against other buyers.
Stack with Down Payment Assistance
You can combine VA financing with California DPA programs.
CalHFA MyHome + VA example:
- VA loan: $0 down
- CalHFA MyHome: 3.5% for closing costs
- CalHFA ZIP: $10,000 additional
On a $650,000 home, CalHFA could cover $32,750 in costs. Combined with zero down, that's $0 out of pocket.
See all California down payment assistance programs
VA vs. Conventional: Cost Comparison
Here's a side-by-side on a $600,000 purchase:
| Cost | VA Loan | Conventional (5% down) |
|---|---|---|
| Down payment | $0 | $30,000 |
| Funding fee / PMI | $12,900 (financed) | $250-$500/month PMI |
| Closing costs | ~$12,000 | ~$15,000 |
| Cash needed at closing | ~$12,000 | ~$45,000 |
The VA buyer needs $33,000 less cash. And once PMI is factored in over 5-10 years, the VA loan saves $15,000-$60,000 more on top of that.
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VA Loans in California: The Basics Every Veteran Should Know
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VA Loan Eligibility: Who Qualifies and How to Get Your COE
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More in This Series
- VA Loans in California: The Basics -- overview and key benefits
- VA Loan Eligibility: Who Qualifies and How to Get Your COE -- service requirements and COE process
- VA Loan Types: Purchase, Refinance, IRRRL, and Cash-Out -- every VA loan option
Get your free VA loan quote to see your exact costs.
Better Offers Inc | CA DRE #01212512
VA-Approved Lender | Serving California Veterans Since 2011