First-time Veteran buyers who use a VA loan typically have to budget for the VA funding fee, unless they are exempt, plus a long list of recurring costs, such as:
- Property taxes
- Homeowners insurance
- Possible flood insurance
- HOA dues
- Utilities
- Ongoing maintenance
The VA loan removes the need for a down payment in most cases and requires no monthly private mortgage insurance, but it doesn’t eliminate the everyday cost of owning a home. Knowing which costs are one-time and which repeat every month will help you budget in your first year.
One-Time Costs at Closing
The VA Funding Fee
The VA funding fee is a one-time payment that helps keep the loan program running at little cost to taxpayers, since VA loans require no down payment and no monthly mortgage insurance. According to the U.S. Department of Veterans Affairs, for a first-time VA purchase loan with no down payment, the funding fee is 2.15% of the loan amount. Putting money down lowers it: 1.5% with 5% down, and 1.25% with 10% or more down. If you have used a VA loan before and put nothing down, the fee rises to 3.3%.
On a $300,000 loan, a 2.15% fee comes to $6,450. You can pay it in cash at closing or roll it into the loan and pay it off over time.
Many Veterans pay nothing at all. The VA waives the funding fee if you are receiving VA compensation for a service-connected disability, are eligible for that compensation but receiving retirement or active-duty pay instead, are a surviving spouse receiving Dependency and Indemnity Compensation, or are an active-duty Purple Heart recipient as of your closing date. If you are later awarded disability compensation with an effective date before your closing, you may be eligible for a refund.
One newer benefit: starting with tax year 2026, VA News reports that Veterans, service members, and surviving spouses can deduct the VA funding fee on their taxes when buying a home with a VA-guaranteed loan. This is informational, not tax advice, so confirm the details with a tax professional.
Other Closing Costs
The funding fee is not the only money due at closing. The VA confirms that buyers and sellers can negotiate who pays costs such as the loan origination fee, VA appraisal fee, title insurance, recording fees, credit report charges, and hazard insurance and taxes. The Consumer Financial Protection Bureau found that median total loan costs on home purchase loans were close to $6,000 in 2022, after rising 21.8% from 2021, so this is not a trivial line item.
The VA builds in protections that conventional buyers do not get. Lenders may charge a flat origination fee of no more than 1% of the loan amount. There is also a list of "non-allowable" fees the Veteran is not permitted to pay when the lender charges that flat 1%. These commonly include things like attorney fees for the lender's benefit, prepayment penalties, and certain processing or document charges. When those fees come up, the seller, lender, or agent absorbs them.
A few important clarifications:
- On a purchase loan, the VA allows you to finance only the funding fee into the loan. All other closing costs must be paid at closing, covered by seller credits, or offset by lender credits.
- Sellers can pay all of your loan-related closing costs, but seller concessions (things of value beyond standard costs, like prepaid taxes or funding-fee credits) are capped at 4% of the home's reasonable value.
The Consumer Financial Protection Bureau lists appraisal fees, title insurance, government taxes, and prepaid expenses such as property taxes and homeowners insurance among the charges paid at closing.
Recurring Costs After You Move In
This is where first-time owners most often underestimate. A fixed-rate mortgage keeps your principal and interest steady, but the rest of your payment can move every year.
Property Taxes
Property taxes are local, they vary widely, and they tend to rise over time. The CFPB explains that if your monthly payment includes an escrow account for taxes and insurance, your total payment goes up or down as those bills change.
New-construction and newly purchased homes deserve special attention. Many areas reassess a property at its new value after a sale, which can push taxes higher than what the previous owner paid. For new builds, the first tax bill is sometimes based on the land alone, then jumps sharply once the finished home is assessed a year or two later.
Homeowners (Hazard) Insurance
Lenders require you to carry homeowners insurance, often called hazard insurance, and the cost has climbed steeply. According to the Consumer Federation of America, homeowners insurance premiums rose an average of 24% from 2021 to 2024, with the typical homeowner paying $3,303 per year by 2024. Premiums climbed in 95% of U.S. ZIP codes over that period. Budget for the premium, and expect it to rise at renewal even if you never file a claim.
Flood Insurance
Homeowners insurance doesn’t cover flood damage. If your home sits in a high-risk flood zone (a FEMA-designated Special Flood Hazard Area) and you have a federally backed mortgage, flood insurance is mandatory. FEMA confirms that homes in high-risk areas with government-backed loans are required to carry it, and that most homeowners policies exclude flood damage entirely. Flood-zone designations beginning with "A" or "V" trigger the requirement.
Cost varies by the property's individual flood risk. FEMA reports that National Flood Insurance Program policies for single-family homes average about $1,098 a year inside the Special Flood Hazard Area and about $492 outside it. Plan for a separate annual premium, and remember there is generally a 30-day waiting period for a new policy to take effect.
No PMI
VA loans never require private mortgage insurance, even with no down payment. On a conventional loan with less than 20% down, PMI can add a large monthly cost.
HOA Dues
If your home is in a community with a homeowners association, the dues will be an ongoing cost. The U.S. Census Bureau found that about 21.6 million owned households paid a condo or HOA fee in 2024, with a national median of $135 a month. About 26% of households paid under $50 a month, while roughly 3 million paid more than $500. Dues can also rise, and associations can levy special assessments for big repairs.
Utilities
Renters often have some utilities covered while owners pay for everything, and a house is usually larger than an apartment. Electricity alone is a major cost. Per the U.S. Energy Information Administration, the average U.S. residential electricity bill was about $142 a month in 2024, but the mean varies sharply by state, from roughly $93 a month in New Mexico to more than $212 in Hawaii. Add water, sewer, gas, trash, and internet, and the monthly total climbs well beyond the electric bill.
Maintenance and Repairs
A widely used guideline is to set aside 1% to 4% of your home's value each year for maintenance, or about $1 per square foot annually. On a $300,000 home, that is $3,000 to $12,000 a year. Newer homes trend toward the low end; older homes and harsh climates toward the high end.
The U.S. Census Bureau reports that owners of older homes (those built before 1950) spent a median of $1,800 a year on upkeep, which includes both improvements and routine maintenance like painting, plumbing, and roofing.
Emergency Repairs and Home Warranties
Beyond routine upkeep, big-ticket systems fail without warning. A water heater, an HVAC unit, or a roof can become an immediate four- or five-figure expense. Keep a separate emergency fund for these, on top of routine maintenance savings. Some buyers purchase a home warranty to cap the cost of certain repairs, which can be worth comparing, though it is not a substitute for a cash cushion.
Escrow Shortages and Payment Increases
Even with a fixed-rate loan, your monthly payment can rise. Your servicer collects money each month into an escrow account to pay your property taxes and insurance, then reviews the account once a year. If taxes or insurance came in higher than projected, the account runs short. Under federal escrow rules, you typically either pay the shortage in a lump sum or spread it across the next 12 months, which raises your payment. With taxes and insurance both climbing in recent years, increases have become more common.
Military Moves and PCS Considerations
For active service members, relocation adds another layer. A Personally Procured Move (also called a DITY move) reimburses you based on the government's calculated cost and the actual weight you move. As Military OneSource explains, the government pays an incentive equal to its constructed cost to move you, and if you can do it for less, you keep the difference. The flip side is that if your move costs more than the incentive, the overage comes out of your pocket.
A Simple Way to Budget
Think in two categories:
- One-time costs: funding fee (if not exempt) and closing costs. Confirm your exemption status and your Loan Estimate.
Recurring costs: principal and interest, property taxes, homeowners insurance, flood insurance if required, HOA dues, utilities, and a maintenance fund of roughly 1% to 4% of the home's value per year, plus a separate emergency repair fund.
The 28/36 rule, suggests keeping your total housing payment at or below 28% of your gross monthly income and your total debt at or below 36%. Aiming at the lower end leaves room for the increases that come with escrow adjustments and rising insurance. Read more about Veteran lifestyle topics
FAQs
Do Veterans pay closing costs on a VA loan?
Yes. While the funding fee can be financed and some fees are off-limits to the buyer, Veterans still pay closing costs such as the appraisal, title insurance, recording fees, and prepaid taxes and insurance unless the seller or lender covers them. The VA caps the lender's origination charge at 1% of the loan amount and bars certain non-allowable fees.
Are disabled Veterans exempt from the VA funding fee?
In most cases, yes. The VA waives the funding fee for Veterans receiving compensation for a service-connected disability, those eligible for it but receiving retirement or active-duty pay instead, certain surviving spouses, and active-duty Purple Heart recipients. Confirm your status on your Certificate of Eligibility.
Is the VA funding fee refundable?
Not usually, but if you are later awarded VA disability compensation with an effective date before your loan closed, you may qualify for a refund of the funding fee.
Do VA loans require homeowners insurance?
Yes. Like all mortgage lenders, VA lenders require you to carry homeowners (hazard) insurance, and other types of insurance may be required according to where your home is. VA loans do not require private mortgage insurance, which is a separate cost from your hazard coverage.
How much should I budget for home maintenance?
About 1% to 4% of your home's value per year, or about $1 per square foot annually. Older homes and tougher climates may lean toward the higher end. Keep this money in a dedicated account, separate from your emergency repair fund.
