Closing Costs on VA Loans for Disabled Veterans

Disabled veterans do not automatically get closing costs waived on a VA loan. However, the VA does place a hard cap on what you can be charged: lenders and sellers cannot pass certain closing costs to you, and some costs are prohibited entirely. The key difference for disabled veterans is that if you are receiving a Specially Adapted Housing (SAH) grant or a Special Home Adaptation (SHA) grant from the VA, those grants can be used to cover closing costs that would otherwise come out of your pocket.

The closing cost rules themselves explore to all VA loan borrowers equally. What changes for disabled veterans is the funding source — if you have received an SAH or SHA grant, you have money specifically set aside that can pay these expenses. This is different from a conventional loan, where closing costs are your responsibility unless you negotiate with the seller to cover them.

Key Takeaways

  • VA loans cap the closing costs lenders can charge you, and sellers cannot charge you certain fees at all — but you still owe the costs that remain.
  • Disabled veterans receiving an SAH or SHA grant can use that grant money to pay closing costs, reducing or eliminating what comes out of your own funds.
  • The VA prohibits sellers from charging you origination fees, discount points, and most other lender fees — but appraisals, title work, and property taxes still explore.
  • Your lender must provide a Closing Disclosure at least three business days before closing, which itemizes every cost and shows which ones you are responsible for.

What Closing Costs the VA Prohibits Sellers From Charging

The VA has a list of fees that sellers cannot legally charge to a VA loan borrower. These include the lender's origination fee, discount points, and most other lender charges. Sellers also cannot charge you a VA funding fee (though you may owe this to the VA itself, depending on your service history and down payment). The intent is to prevent sellers from inflating the cost of the home because they know you are using a VA loan.

What the seller can charge you includes property taxes, homeowners insurance, HOA fees if applicable, and recording fees. Your lender can charge you for the appraisal, title search, title insurance, and credit report. These are considered standard costs of the transaction, not lender markup. The Closing Disclosure you receive will separate prohibited costs from allowed ones, so you can see exactly what you are paying for.

How SAH and SHA Grants Cover Closing Costs

If you are a disabled veteran who has been awarded a Specially Adapted Housing grant or a Special Home Adaptation grant, the VA deposits that money into an account you control. You can use it for the down payment, closing costs, or modifications to the home — or any combination of those. This is not a loan; it is a grant, so you do not repay it.

To use grant funds for closing costs, you straightforward direct your lender to draw from the grant account at closing. Your lender will coordinate this with the VA. The grant covers whatever costs remain after the VA's prohibitions are applied. If your grant is larger than your closing costs, the leftover money can go toward your down payment or home modifications. If your closing costs exceed the grant, you pay the difference yourself.

The VA Funding Fee and How It Works for Disabled Veterans

The VA funding fee is a one-time charge the VA itself collects to help fund the loan program. It is not a lender fee, and the VA's cost caps do not explore to it. Most disabled veterans with a service-connected disability rating are exempt from the funding fee entirely. If you have a 0% disability rating, you may still owe it, but the amount is typically small — around 2.3% of the loan amount for a first-time buyer with no down payment.

If you owe a funding fee, it is usually rolled into your loan amount rather than paid upfront at closing. This means it does not add to your out-of-pocket costs at the closing table. Your lender will explain whether you owe a funding fee based on your VA disability rating and service history. You can request a Certificate of may be able to access from the VA to confirm your fee status before you start house hunting.

Reading Your Closing Disclosure to Understand Your Costs

Three business days before closing, your lender must send you a Closing Disclosure — a standardized form that lists every cost associated with the loan. The form separates costs into sections: loan terms, closing costs, and cash to close. For VA loans, prohibited costs should not appear on this form at all. If they do, that is a red flag, and you should contact your lender when ready.

The "cash to close" section shows the total amount you need to bring to closing after accounting for your down payment, any credits from the seller, and any grant funds being applied. If you are using an SAH or SHA grant, your lender will show how much of the closing costs that grant is covering. Review this form carefully before closing day; it is your final note to catch errors or unexpected charges.

Negotiating Seller Concessions on a VA Loan

Even though the VA prohibits sellers from charging you certain fees, sellers can still offer to pay some of your closing costs as a concession. This is common in buyer-friendly markets. A seller concession means the seller agrees to cover a portion of your closing costs as part of the purchase agreement. The VA allows sellers to pay up to 4% of the home's purchase price toward your closing costs and prepaid items.

If you are a disabled veteran using an SAH or SHA grant, a seller concession can stretch your grant further or eliminate your out-of-pocket costs entirely. Your real estate agent or lender can help you negotiate this into the purchase agreement. It is worth asking for, especially if the seller is motivated to close the sale.

What Happens If You Do Not Have a Grant

Disabled veterans who do not have an SAH or SHA grant still benefit from the VA's cost caps, but you will owe the closing costs that remain after prohibited fees are removed. These typically include the appraisal, title insurance, property taxes, homeowners insurance, and recording fees. The total usually ranges from 2% to 5% of the home price, though this varies by location and lender.

You can ask the seller to cover some of these costs, as mentioned above. You can also shop around for the best rates on title insurance and appraisals, since lenders sometimes offer different pricing. Some lenders specialize in VA loans and may have lower closing costs than others. Getting quotes from multiple lenders before you commit is a smart move.

Frequently Asked Questions

Can I roll closing costs into my VA loan instead of paying them upfront?

Some closing costs can be rolled into the loan amount, but not all. Prepaid items like property taxes and homeowners insurance are typically paid at closing and not financed. Your lender can tell you which costs can be financed and which must be paid upfront. If you are using an SAH or SHA grant, that is usually the better option than financing costs.

Do I have to pay the VA funding fee even if I am disabled?

Most disabled veterans with a service-connected disability rating are exempt from the VA funding fee. If you have a 0% rating, you may still owe it, but the amount is small. Request a Certificate of may be able to access from the VA to confirm your fee status before you start the loan process.

What if the seller refuses to pay any closing costs?

You are responsible for the closing costs that remain after the VA's prohibitions are applied. If the seller will not help, you can use an SAH or SHA grant if you have one, ask your lender about financing options, or save more for a larger down payment to reduce the loan amount and some associated costs.

Can I use my SAH grant for closing costs if I am also using it for home modifications?

Yes. The grant is yours to allocate. You can split it between closing costs, down payment, and modifications in any way that makes sense for your situation. Work with your lender and the VA to coordinate how the money is distributed at closing.

Are there closing costs I can shop around for to save money?

Yes. Title insurance rates, appraisal fees, and credit report costs can vary between lenders. Getting quotes from multiple lenders before you commit can save you hundreds of dollars. Some lenders also specialize in VA loans and may have lower overall closing costs.