Do San Diego Veterans Pay Closing Costs on VA Loans?

San Diego veterans exploring VA loan benefits often wonder what they’ll actually need to pay closing costs on at the finish line. The good news is that while VA loans do involve closing costs, they’re often lower than conventional loans—and there are several ways to reduce (or even avoid) out-of-pocket expenses at closing. By understanding which fees are typical, which can be negotiated, and what can be covered through credits, you can plan your purchase with a lot more confidence. This guide breaks down what San Diego veterans can expect when it comes to VA loan closing costs.

What Closing Costs Can Veterans Expect on VA Loans in San Diego?

VA loans come with specific closing costs that differ from conventional financing. The Department of Veterans Affairs limits which fees lenders can charge to veterans, creating a more borrower-friendly cost structure. Allowable costs typically include the VA funding fee, appraisal fee, credit report charges, title insurance, recording fees, and origination charges up to one percent of the loan amount. San Diego veterans should expect total closing costs to range between 3% and 5% of the purchase price, though this can vary based on the property value and specific loan terms.

The VA funding fee represents the largest single closing cost for most veterans. This one-time fee helps sustain the VA loan program for future generations of service members. Veterans receiving VA disability compensation are exempt from this fee entirely, which can represent substantial savings on a San Diego home purchase.

 

Four Ways San Diego Veterans Can Reduce or Eliminate Closing Costs

Veterans have several strategies available to minimize their upfront expenses. Seller concessions allow the home seller to contribute up to 4% of the purchase price toward the veteran’s closing costs, which can cover most or all of these expenses in many transactions. This approach is particularly common in San Diego’s competitive market when sellers are motivated to close quickly.

Lender credits offer another path to reducing out-of-pocket costs. Your mortgage lender can provide credits that offset closing expenses in exchange for accepting a slightly higher interest rate. This trade-off makes sense for veterans who prefer to preserve cash for home improvements or emergency reserves rather than paying everything upfront.

Rolling closing costs into the loan amount is permitted on VA loans when refinancing, though this option isn’t available for purchase transactions. Veterans can also negotiate which party pays certain customary fees during the offer process, potentially shifting some costs to the seller as part of the purchase agreement.

The VA specifically prohibits lenders from charging veterans for certain costs that appear on conventional loans. These non-allowable fees include attorney fees for the lender, loan processing fees, underwriting fees, application fees, and various document preparation charges. This protection ensures veterans aren’t paying excessive fees simply to access their earned benefits.

 

Frequently Asked Questions

Do veterans have to pay closing costs on VA loans?

Yes, VA loans do have closing costs, but they are typically lower than conventional loans due to VA restrictions on allowable fees. Veterans can use seller concessions, lender credits, or other strategies to reduce or eliminate out-of-pocket expenses.

Can sellers pay closing costs on VA loans?

Yes, sellers can contribute up to 4% of the purchase price toward the veteran’s closing costs through seller concessions. This is a common practice that can significantly reduce the borrower’s out-of-pocket expenses.

What closing costs are not allowed on VA loans?

The VA prohibits lenders from charging veterans for attorney fees, loan processing fees, underwriting fees, application fees, rate lock fees, and document preparation charges that exceed certain limits.

How much are typical closing costs on a VA loan in San Diego?

Total closing costs on San Diego VA loans typically range from 3% to 5% of the purchase price, though the exact amount varies based on property value, loan amount, and negotiated terms.

Can you roll closing costs into a VA loan?

Closing costs can be rolled into VA refinance loans but not into VA purchase loans. For purchases, veterans must use seller concessions, lender credits, or pay costs out-of-pocket.

Are disabled veterans exempt from VA loan closing costs?

Veterans with service-connected disabilities are exempt from the VA funding fee but still responsible for other allowable closing costs unless covered through seller concessions or lender credits.

What is the maximum seller concession on a VA loan?

Sellers can contribute up to 4% of the home’s purchase price toward the veteran’s closing costs, prepaid items, and discount points on VA loans.

Do you need money down for a VA loan in San Diego?

VA loans require no down payment for most borrowers, though making a voluntary down payment of at least 5% can reduce the VA funding fee and lower monthly payments.

Can lenders charge origination fees on VA loans?

Yes, lenders can charge an origination fee up to 1% of the loan amount on VA loans. This fee compensates the lender for processing and underwriting the loan.

What are prepaid costs on a VA loan?

Prepaid costs include items paid in advance such as homeowners insurance premiums, property taxes, prepaid interest, and initial escrow deposits for taxes and insurance.

How does the VA appraisal fee work?

The VA appraisal fee is an allowable closing cost that veterans must pay. The fee varies by location and property type, with San Diego appraisals typically ranging from $500 to $800.

Can you negotiate closing costs on a VA loan?

Yes, veterans can negotiate who pays certain closing costs as part of the purchase agreement. Many costs can be shifted to the seller or offset with lender credits.

Is title insurance required on VA loans?

Yes, lender’s title insurance is required on VA loans. Veterans pay for the lender’s policy, while the seller typically pays for the owner’s title insurance policy in California.

What is a lender credit on a VA loan?

A lender credit is money the lender contributes toward closing costs in exchange for the borrower accepting a higher interest rate. This reduces upfront expenses but increases the monthly payment.

 

Conclusion

San Diego’s real estate market presents unique considerations for veterans planning their closing costs. Property values in coastal communities differ significantly from inland areas, which affects both the loan amount and percentage-based fees. Working with a mortgage professional who understands VA lending and the local San Diego market helps veterans identify the most cost-effective approach for their specific situation. The goal is to maximize your home-buying power while minimizing unnecessary expenses, allowing you to transition into homeownership with financial confidence and security.