A Seller Can Cover 100% of Your VA Closing Costs. The 4% Cap Only Limits What Comes After That.
9 min read · Last updated October 22, 2026
- A seller can pay an unlimited amount of a veteran’s normal closing costs on a VA loan. The 4% rule never touches that bucket at all.
- The 4% cap applies only to a narrower list of extras: debt payoffs, the VA funding fee if the seller covers it, rate buydowns, gifts, and similar concessions, measured against the home’s VA reasonable value.
- Real estate commissions and discount points are not seller concessions under VA rules and are never counted toward the 4% cap, no matter how large they are.
- Separately, the Code of Federal Regulations (CFR), specifically 38 CFR 36.4313, lists the specific fees a VA lender may charge a veteran at all. Anything off that list, like a lender’s attorney fee or a document-preparation fee, cannot be charged to the veteran regardless of what the seller agrees to pay.
A VA seller can cover 100% of a veteran’s ordinary closing costs, with no dollar limit at all. Only a narrower category of seller concessions, like a debt payoff or a seller-paid funding fee, is capped at 4% of the home’s appraised value.
In this article
- Concessions and closing costs are not the same bucket
- Who this applies to
- What counts toward VA loan seller concessions, and what doesn’t
- How to put this in your purchase offer
- The mistake that costs veterans money at the closing table
- Frequently asked questions
Imagine a veteran named Priya making an offer on a $380,000 house with a VA loan and zero down payment. She asks the seller to cover her closing costs, pay off a small collections account that’s dragging her credit, and absorb her VA funding fee.
Her agent tells her that’s “over the 4% limit” and the deal will fall apart. It won’t. Most of what she’s asking for isn’t subject to that limit at all.
Concessions and closing costs are not the same bucket
A VA seller can agree to pay every normal closing cost a buyer would otherwise owe, with no dollar ceiling whatsoever. VA’s own published guidance confirms the buyer and seller simply negotiate who pays which closing cost, and 38 CFR 36.4313 itemizes the specific allowable costs, including:
- The loan origination fee
- The appraisal fee
- The credit report fee
- Recording fees
- Title examination and title insurance
- The buyer’s prepaid property tax and insurance escrow deposit
A seller concession is a different thing. VA defines it as anything of value added to the transaction that goes beyond those normal closing costs, and limits the total of those extras to no more than 4% of the home’s reasonable value, the appraised figure that shows up on the lender’s Notice of Value. Mixing the two buckets together is what convinces veterans and agents that a seller “can’t afford” to help, when in practice the seller can often cover far more than 4% in total dollars.
Who this applies to
This rule applies to any VA purchase loan, regardless of the veteran’s service era, disability rating, or whether it’s a first or subsequent use of entitlement. It has nothing to do with eligibility for the loan itself. It only governs how much a seller may contribute once a purchase contract is being written, and it applies the same way whether the veteran is buying with no money down or with a larger down payment.
The rule also doesn’t require a seller to offer anything. Nothing here obligates a seller to pay for a veteran’s closing costs or concessions. It only sets the ceiling on what the seller may agree to, if the seller is willing.
What counts toward VA loan seller concessions, and what doesn’t
This is the part that trips up most purchase contracts. Three items people assume work one way actually work the opposite way.
Real estate commissions are not seller concessions at all. The seller pays an agent’s commission as a cost of selling the house, not as something of extra value handed to the buyer, so it never counts against the 4% figure no matter the amount.
Discount points work the same way. A seller can pay for the buyer’s discount points, even several of them, without that payment touching the 4% ceiling, because VA treats points as a loan cost, not a concession.
Payoff of the buyer’s other debts is where the assumption flips. If a seller agrees to pay off a veteran’s credit card balance, a collections account, or a judgment so the loan can close, that payoff counts as a concession, dollar for dollar, against the 4% cap. The same goes for:
- A seller-paid VA funding fee
- A seller-funded interest-rate buydown
- Homeowners Association (HOA) dues paid on the buyer’s behalf beyond a short initial period
- Outright gifts like furniture or a prepaid warranty
| Item a seller might pay | Counts toward the 4% cap? | Can the veteran be charged this instead? |
|---|---|---|
| Loan origination fee, appraisal, title insurance, recording fees, credit report, prepaid tax/insurance escrow | No | Yes, these are allowable veteran-paid closing costs under 38 CFR 36.4313 |
| Discount points, even multiple points | No | Yes, an allowable charge if the veteran chooses to pay it |
| Real estate agent commission | No, not a concession at all | Not applicable. Paid under the listing agreement, not by the veteran |
| Buyer’s VA funding fee, if the seller pays it | Yes | Not applicable if seller-paid. Otherwise the veteran pays or finances it |
| Payoff of the buyer’s judgments, collections, or other debts | Yes | Not applicable. This is seller money, not a veteran-paid fee |
| Interest-rate buydown or HOA dues paid on the buyer’s behalf | Yes | Not applicable. Seller-funded only |
| A lender’s attorney fee, document-preparation fee, or a standalone broker fee | Not applicable | Never. Not on 38 CFR 36.4313’s list of fees a veteran may pay |
That last row matters on its own. Separate from the concession cap entirely, 38 CFR 36.4313 lists the specific closing costs a VA borrower may be charged, and bars any brokerage or service charge against the veteran beyond that list.
A lender’s own attorney fee and a standalone document-preparation fee are not on it. No seller agreement changes that. Those costs fall to the lender or another party no matter what the purchase contract says.
The math plays out this way on Priya’s $380,000 purchase, using VA’s current first-time-use funding fee rate of 2.15% for a loan with no down payment.
Her seller agrees to cover the loan origination fee ($3,800), the appraisal ($650), the credit report ($75), recording fees ($275), title examination and insurance ($2,200), and her prepaid tax and insurance escrow deposit ($2,800). That’s $9,800 in ordinary closing costs, and none of it touches the 4% cap.
The seller also agrees to cover Priya’s VA funding fee ($8,170, 2.15% of $380,000) and to pay off a $2,500 collections account so her loan can close. Those two items are concessions, and they add up to $10,670.
The 4% cap on a $380,000 reasonable value is $15,200. Priya’s capped concessions total $10,670, which leaves $4,530 of room still unused under that ceiling. Add her $9,800 in uncapped closing costs, and the seller is contributing $20,470 toward her purchase, well over 4% of the price in total dollars, while the loan stays fully compliant because only $10,670 of it ever counted against the limit.
How to put this in your purchase offer
Ask your agent to write the purchase contract in two explicit lines rather than one lump “seller to pay closing costs” clause: one line for ordinary closing costs with no stated ceiling, and a separate line, if needed, for specific concessions like a debt payoff or a funding-fee credit, capped at 4% of the sale price as a placeholder until the Notice of Value sets the real figure.
A seller may agree to any amount of ordinary closing costs they’re willing to pay. Whether a seller agrees to anything at all is a matter of negotiation, not a VA guarantee. Treat this as the ceiling on what’s possible, not a promise of what you’ll get.
A VA appraisal still has to support the purchase price before any of this math matters. See our guide to VA appraisal minimum property requirements and the Tidewater reconsideration process for that piece of the transaction.
The mistake that costs veterans money at the closing table
The costliest version of this mistake runs the opposite direction from what most people expect. A veteran negotiates a seller credit that looks generous on paper, say $18,000 toward “closing costs,” without splitting out which parts are concessions. If $11,000 of that turns out to be debt payoff and funding-fee coverage against a reasonable value that caps concessions at $9,000, the lender has to unwind part of the deal days before closing rather than catching it at the offer stage.
The fix is sequencing, not negotiating harder. Get the Notice of Value first, since the 4% figure is based on that number, not the contract price. Then itemize every dollar the seller is covering into the two buckets above before the purchase contract is signed, not after.
VA’s funding fee rules also change what a seller-paid funding fee actually costs the deal. A veteran who is exempt from the fee entirely removes that line from the concession math altogether.
Frequently asked questions
Is a seller required to pay any of my closing costs or concessions?
No. Nothing in VA’s rules requires a seller to contribute anything. The 4% figure and the uncapped closing-cost rule only set the ceiling on what a seller may agree to pay if they choose to, and whether a seller offers concessions at all depends entirely on your purchase negotiation.
Can a seller pay my real estate agent’s commission without it counting against the 4% cap?
Yes. VA treats a commission as a cost of selling the property, not a concession to the buyer, so it never counts toward the 4% limit regardless of the amount. The same logic applies to discount points the seller agrees to cover for you.
What happens if my purchase contract asks for more in concessions than the 4% cap allows?
The lender has to flag it before closing. Either the concession amount gets reduced to fit under the cap, or part of what was labeled a concession gets reclassified as an ordinary, uncapped closing cost if it genuinely qualifies as one, before the loan can be guaranteed.
Can the seller cover my closing costs and my VA funding fee at the same time?
Yes, and they’re tracked separately. Ordinary closing costs have no limit. A seller-paid funding fee is a concession and counts against the 4% cap, along with anything else in that narrower category, like a debt payoff or a rate buydown.
How do I find out which fees I legally cannot be charged on a VA loan?
Your lender has to follow 38 CFR 36.4313’s list of fees a veteran may be charged. Ask for an itemized closing disclosure and compare it against that list. Anything not on it, like a lender’s attorney fee, should not appear as a charge to you under any seller arrangement.
