Yes, you can negotiate closing costs. Some fees stay flexible and open to discussion with your lender, the seller, or third-party providers. Others, like government recording fees or transfer taxes, are fixed by law, and it’s important to know which category a fee falls into.
For Veterans and military families using a VA-backed loan, the negotiation looks a little different than it does for a conventional buyer. The VA:
- Sets rules about which fees a lender can charge
- Caps how much sellers can contribute
- Bans certain charges
We’ll explain those rules in this article.
What Closing Costs Are
Closing costs are the fees and prepaid expenses you owe when you finalize a home purchase or refinance. They typically fall into three buckets:
- Lender fees: origination, underwriting, application, and processing charges
- Third-party fees: appraisal, title search, title insurance, survey, and recording costs
- Prepaid items: homeowners insurance, property taxes, and prepaid interest that go into escrow
The Consumer Financial Protection Bureau requires every lender to send you a standardized Loan Estimate within three business days of your application. That form breaks out each fee by category, which is exactly why it matters so much in a negotiation. You can't ask a lender to lower a charge you can't see clearly, and the Loan Estimate exists to make comparison shopping possible.
Yes, You Can Negotiate
The Consumer Financial Protection Bureau confirms that you can negotiate the terms and costs of a mortgage right up until the day you sign closing documents, though the lender or seller can always decline your request. The bureau also notes that you'll usually have an easier time negotiating fees your lender charges than fees a third party charges, since providers like appraisers and title companies set their own pricing.
The VA assigns your appraiser rather than letting you choose one, so that particular fee stays off the table.
Fees You Can Usually Negotiate
- Origination fee. This is the fee a lender charges to process and underwrite your loan, and it's often the single most flexible line item on your Loan Estimate.
- Discount points. You can negotiate buying down your rate, and whether you buy points at all.
- Title insurance and title search fees. You can sometimes shop these separately from the lender's recommended provider and split them between buyer and seller.
- Homeowners insurance. Nothing requires you to use the carrier a lender suggests. Shopping this on your own can meaningfully lower your prepaid costs.
- Survey, attorney, and escrow fees. Buyers and sellers can sometimes share or shift these in the purchase contract.
Fees That Are Set in Stone
- Government recording fees
- Transfer taxes, where the state or municipality imposes them
- Property taxes owed at closing
- Per diem prepaid interest, which follows a fixed formula tied to your closing date
- The credit report fee, a small, fixed cost regardless of lender
Closing costs typically run 2% to 5% of the purchase price, not counting your down payment. That range alone gives you a good reason to request Loan Estimates from more than one lender before you commit.
How VA Loan Closing Costs Work Differently
A VA-backed loan changes the negotiation in a few important ways.
1% Origination Cap
A lender's flat origination charge is limited to 1% of the loan amount. If a lender charges that flat 1% fee, it can't tack on separate charges for things the VA considers overhead, like processing or underwriting. That cap gives Veterans a built-in ceiling that conventional borrowers simply don't have.
Non-Allowable Fees
VA rules block lenders from passing certain charges on to a Veteran borrower at all, regardless of what a lender's standard fee schedule says. These typically include:
- Loan application and processing fees, when a lender charges them separately from the flat 1% origination fee
- Attorney fees that benefit the lender
- Prepayment penalties
- Real estate broker commissions
The VA Funding Fee
Most Veterans using the home loan benefit pay a one-time VA funding fee, which helps offset the cost of a program that requires no down payment and no monthly mortgage insurance. The exact percentage depends on your down payment amount and whether it's your first or a subsequent use of the benefit.
Veterans receiving VA compensation for a service-connected disability, along with certain surviving spouses and Purple Heart recipients, don't pay it at all. You can also roll the funding fee directly into your loan amount instead of paying it in cash at the table.
Seller Concessions Up to 4%
A lot of Veterans leave money on the table simply by not asking about this one. Under VA guidelines, the seller can pay standard closing costs in full and can additionally contribute up to 4% of the loan amount toward concessions. Concessions form a distinct category from ordinary closing-cost credits and can include the VA funding fee, prepaid taxes and insurance, payoff of your debt balances, and temporary interest rate buydowns.
You have to negotiate seller concessions into the purchase agreement itself, which means the request needs to go in during the offer stage.
How to Negotiate Closing Costs
- Get Loan Estimates from at least three lenders. Comparing Section A (origination charges) and Section B (services you cannot shop for) line by line shows exactly where lenders differ.
- Ask for breakdown of every lender fee. A vague number is hard to challenge. A line-item list is not.
- Shop your own title insurance and homeowners insurance. Lenders often recommend providers, but nothing requires you to use them.
- Negotiate seller concessions into the purchase offer, not after the appraisal comes back.
- Ask about lender credits. A slightly higher interest rate in exchange for reduced upfront costs can make sense if you plan to sell or refinance within a few years.
- Time your closing date deliberately. The number of days between closing and your first payment sets your prepaid interest, so the date you pick affects the dollar amount due at the table.
- Compare your Closing Disclosure against your Loan Estimate. Under RESPA tolerance rules, most fees can't increase by more than a small margin between the two documents without an explanation.
In summary, bring Loan Estimates from at least three lenders to the table, raise seller concessions before you sign a purchase offer, and confirm your funding fee status early. Those three moves may do a lot to lower your closing costs. Read more.
FAQs
Can a lender refuse to negotiate closing costs?
Yes. A lender has no obligation to lower or waive a fee, and the CFPB is clear that both sides can decline changes right up until signing.
Do VA loans have lower closing costs than conventional loans?
Not automatically, since third-party costs like title and recording fees stay largely the same across loan types. What differs is the 1% origination cap, the ban on certain non-allowable fees, and the option to roll the funding fee into the loan, all of which can reduce the cash you need at the table.
Can the seller pay all of my closing costs on a VA loan?
The seller can pay standard closing costs in full and add up to 4% of the loan amount in additional concessions, but you need to write this into the purchase agreement before closing, not negotiate it afterward.
Is the VA appraisal fee negotiable?
No. The VA assigns your appraiser and sets the fee, so this cost doesn't move regardless of lender.
What is the difference between a closing-cost credit and a seller concession on a VA loan?
A closing-cost credit covers ordinary expenses like title and origination fees, and the VA doesn't cap it. A seller concession covers extras like the funding fee, prepaid taxes, or debt payoff, and the VA caps it at 4% of the loan amount.
