How to reduce VA closing costs Make a down payment to reduce the VA funding fee, request its elimination, if you qualify, negotiate for the seller to pay most closing costs, buying discount points to lower the interest rate on your loan. Learn about the VA funding fee and other closing costs you may have to pay for your direct or VA-backed mortgage loan. Fortunately, a special feature of VA loans is that they don't require a down payment, which can significantly reduce the initial total amount you would pay when you close your mortgage, even with the additional funding fee from the VA. VA loans, for example, include the VA funding fee for non-exempt borrowers as part of their closing costs.
While you can't include all closing costs in your mortgage, the VA does allow you to include the VA funding fee in the total amount of the loan. The closing costs of VA loans are different from conventional loan closing costs because they include the VA funding fee and exclude many of the common charges associated with non-VA loans, such as type locking and escrow charges. Opening fees usually cost between 0.5 and 1% of the mortgage (before factoring in discount points), and the VA limits the amount lenders can charge from VA borrowers to 1%. Part of the reason why VA closing costs vary so much is that the VA funding fee can range from 0.5% to 3.6% of the loan amount, depending on the type of loan.