Yes, the seller is allowed to pay certain closing costs agreed upon in the purchase contract. Sellers may agree to pay up to all of the buyer’s closing costs. Additionally, the seller is allowed to pay some concessions. Think of seller’s concessions as things like furniture and debt payments thrown in to sweeten the deal. The VA funding fee can also be considered a seller’s concession. Concessions cannot exceed 4% of the loan’s value; however, payment of buyer’s closing costs or reasonable discount points are not tallied in that 4%. Also, keep in mind that any fees, like real estate commissions, seller’s legal or broker fees, or costs for termite inspection, MUST be paid for by the seller, because these are fees a VA borrower is not allowed to pay.

The main fee unique to VA loans is the VA Funding Fee. This fee is charged at closing, and can run between 0.5% and 3.6% of the loan amount. The fee is collected and paid to the VA to help offset costs to administer the Loan Guaranty Program. Some borrowers, like surviving spouses and certain disabled Veterans, may be exempt.

Prequalifying is an optional step that can be taken early in the VA loan process. Based on financial information (mostly verbal) from the borrower before applying for a loan, a “prequal letter” can be provided by your lender. It’s not a guaranteed loan offer, but it specifies how much the lender may be willing to lend you, up to a certain amount, based on some assumptions. Having an idea of how much you can borrow can save you time while house hunting. Home sellers and their real estate agents typically prefer a prequal letter to accompany serious offers.