Who Pays Closing Costs on a Texas VA Loan?
One of the most negotiable parts of any real estate transaction is who pays the closing costs. On a VA loan in Texas, the rules give veterans significant protection — and significant negotiating power. Here is a complete breakdown of who can pay what.
What the VA Says About Closing Cost Responsibility
The VA does not dictate who must pay closing costs — it dictates which fees veterans can be charged (allowable fees) and which they cannot be charged (non-allowable fees). The party responsible for each fee is then a matter of negotiation between buyer and seller.
Costs the Veteran (Buyer) Can Pay
VA guidelines allow veterans to pay these closing costs:
| Fee | Typical Range in Texas |
|---|---|
| VA appraisal | $600–$900 |
| Credit report | $50–$75 |
| Title search | $200–$400 |
| Lender's title insurance | $500–$1,500 |
| Recording fees | $100–$300 |
| Survey | $400–$600 |
| Flood zone determination | $15–$25 |
| Origination fee (max 1%) | Up to $3,500 on $350K loan |
| Prepaid interest | Varies |
| Homeowners insurance (1st year) | $1,200–$2,000 |
| Property tax escrow (2–3 months) | $700–$2,500 |
| VA funding fee | 2.15%–3.30% of loan |
Costs the Seller Can Pay (Concessions)
The VA allows sellers to pay up to 4% of the purchase price in concessions on a VA loan. This 4% can cover:
- Any of the buyer's allowable closing costs listed above
- The VA funding fee (entirely)
- Prepaid taxes and insurance
- Payoff of the buyer's debts (to help DTI)
- Temporary interest rate buydowns
Example on a $350,000 Texas home:
- 4% seller concession = $14,000
- Total buyer closing costs = ~$8,000–$10,000
- Seller concession covers everything — buyer brings zero to closing beyond the down payment (which is also zero on a VA loan)
This is why negotiating seller concessions is the single most effective way for Texas veterans to close with zero out-of-pocket costs.
Costs the Lender Can Pay (Lender Credits)
Your lender can also cover closing costs through lender credits — in exchange, you accept a slightly higher interest rate. This is sometimes called a "no-closing-cost loan."
How it works:
- Standard rate: 6.75% with $8,000 in closing costs paid by you
- With lender credits: 7.00% with $0 closing costs
- Monthly payment difference: ~$58/month on $350,000
- Break-even if you pay your own closing costs: 8,000 ÷ 58 = ~138 months (11.5 years)
If you plan to sell or refinance within 5–7 years, lender credits often make financial sense.
Fees the Lender Cannot Charge the Veteran
The VA prohibits lenders from charging veterans these fees — if you see them on your Loan Estimate, dispute them:
- Attorney fees (lender's attorney)
- Real estate brokerage commissions
- HUD/FHA inspection fees
- Prepayment penalties
- Loan application fees
- Document preparation fees
- Mortgage broker fees (above the 1% origination cap)
If a lender charges these, any excess must be paid by the seller, lender, or agent — not the veteran.
Who Pays What in Practice: Texas VA Loan Scenarios
New Construction (Builder Pays)
Many Texas builders — especially in Hutto, Kyle, Georgetown, and Killeen — offer to pay closing costs as a buyer incentive. In this scenario, the veteran pays:
- Nothing (or minimal prepaid interest)
Resale With Negotiated Seller Concessions
Veteran negotiates 3–4% seller concessions. Seller pays:
- Appraisal, title, recording, origination, and prepaid items
- Veteran pays: $0–$500 at closing
Competitive Market, No Concessions
In a hot seller's market where concessions are not available:
- Veteran pays all allowable fees: $6,000–$10,000
- Consider lender credits to reduce this amount
Texas-Specific: Owner's Title Policy
In Texas, it is customary for the seller to pay the owner's title insurance policy — this is a statewide norm, not a law, but most sellers in Central Texas follow it. On a $350,000 home, this saves the buyer approximately $1,500–$2,000.
Frequently Asked Questions
Yes. The VA funding fee is a closing cost and can be covered by seller concessions up to 4% of the purchase price. On a $350,000 first-use loan, the $7,525 funding fee fits well within the $14,000 seller concession allowance.
Real estate agents are generally not permitted to contribute to buyer closing costs under VA guidelines without specific lender approval. The primary sources for closing cost help are the seller, the lender, and the builder.
Yes — your financing type is disclosed in the purchase contract. VA financing is widely accepted in Texas, particularly in military-heavy markets like Killeen, San Antonio, and the Austin suburbs.
