VA Closing Costs on a $400K Loan When the Funding Fee Is Waived

Franklin is a fictional veteran, but his situation comes up all the time. He's buying a home around $400K with a VA loan, and his funding fee is waived. He assumed that meant his closing costs were close to zero. Then he asked what he'd need at the closing table, and the answer surprised him.

A waived funding fee is not waived closing costs

The VA funding fee is a single charge. Veterans with certain exemptions, such as those receiving VA compensation for a service-connected disability, don't pay it. That is a real saving, and it can be a large one on a loan this size. But it is only one line on a much longer list.

What's still there: the VA appraisal, the credit report, title and settlement fees, recording fees, and the lender's charges. On top of those, you'll have prepaids, which are things like the first year of homeowners insurance and money to start your tax and insurance escrow. Prepaids aren't technically closing costs, but they are cash due at closing, so I count them when I plan with a buyer.

The rough range on $400K

A common rule of thumb is that total closing costs run roughly two to five percent of the loan amount. On $400K, that works out to about $8,000 to $20,000. Please treat that as a planning range and not a quote. Your real number depends on the lender, the title company, the property, how much is prepaid, and when in the month you close.

The only way to get the real figure is a Loan Estimate. It lays out every charge in a standard format, so you can compare lenders line by line.

Why VA buyers often have a better shot at the low end

Two VA features help here. First, VA limits what a veteran can be charged for certain fees. For example, the lender's own origination charge is capped at a flat amount, and there is a list of fees a veteran isn't allowed to pay at all. If you see one on a Loan Estimate, ask about it.

Second, VA allows the seller to pay some or all of a buyer's closing costs. That doesn't happen automatically. It has to be negotiated and written into the purchase contract, which is why the timing matters.

What Franklin does with this today

Here's the practical plan I'd walk Franklin through:

1. Ask for a Loan Estimate and read the lender, title and prepaid sections separately.
2. Compare it with a second lender's Loan Estimate, line by line.
3. Have his agent ask for seller-paid closing costs in the offer, before it is signed.
4. Set aside cash for prepaids even if the seller helps with closing costs.

That last point matters. Franklin might get the seller to cover a good share of costs, but insurance and escrow deposits are usually still part of the cash picture, and your lender will confirm how each item is treated.

The Charleston angle

If you're buying around Charleston, talk to your agent about seller-paid costs before you write the offer, not after the inspection. The earlier it's in the conversation, the more options you have.

The bottom line

Fee waived doesn't mean costs waived. Plan for roughly $8,000 to $20,000 on a $400K VA loan as a starting range, get a real Loan Estimate, and use VA's seller-paid option to bring that number down.

Franklin is an illustrative example, not a real client. If you're a veteran or military family looking at a VA purchase, call me at 843-LOW-RATE and I'll walk through your numbers and find the path.

Jason Sharon, Licensed Mortgage Broker, Home Loans Inc. NMLS #1281448. Company NMLS #1728740. Equal Housing Opportunity.