What you usually hear, and the honest answer

We hear a version of this question from almost every military buyer, whether they are heading to Luke AFB in the West Valley, Davis Monthan in Tucson, Fort Huachuca in Sierra Vista or MCAS Yuma. They have saved for the move, not for closing costs, and they are worried that asking the seller to help will make their offer look weak. Some have even been told by a friend that VA buyers are a hassle sellers avoid.

So let's separate the rules from the folklore. The rules come straight from VA.gov, checked today. The negotiation part is real too, and we will be honest about it. But a lot of the worry comes from not knowing that VA splits seller money into two very different buckets.

The two buckets: closing cost credits vs concessions

VA's funding fee and closing costs page puts it plainly: "We allow home sellers or builders to offer credits to cover some or all of the buyer's closing costs." Then it draws the line: "We don't limit credits for a loan's closing costs, but we do limit seller's concessions to no more than 4% of your home's reasonable value." It also says what counts as a concession: "Concessions include credits for the VA Funding Fee, debt payoff, or prepayment of the buyer's hazard insurance."

VA's own list of costs that "you (the buyer) and the seller can negotiate" includes the commission and fees for your real estate professional, the loan origination fee, discount points, the credit report, the VA appraisal fee, hazard insurance and real estate taxes, state and local taxes, title insurance and the recording fee. Which line a specific dollar lands on is something your lender sorts out on the Closing Disclosure, and it is worth asking about before you sign, not after.

Where the funding fee fits

The funding fee is the line most buyers get wrong. VA.gov's chart, effective April 7, 2023, sets the purchase fee at 2.15% of the loan on first use with less than 5% down, 1.5% with 5% or more down and 1.25% with 10% or more down. After first use it is 3.3% with less than 5% down, then 1.5% and 1.25%.

You have three ways to handle it. You can pay it at closing. You can finance it, since VA says "on a purchase or construction/permanent loan, you can finance only the VA funding fee into the loan amount." Or the seller can pay it, and when they do, it counts as a concession inside the 4% cap.

And some buyers do not pay it at all. VA.gov lists who is exempt, including veterans receiving VA compensation for a service connected disability, surviving spouses receiving Dependency and Indemnity Compensation, service members with a proposed or memorandum rating issued before closing, and active duty Purple Heart recipients who provide evidence on or before closing. If you are exempt, the funding fee is zero, which leaves the whole 4% concession room for other things.

Worked example: a Goodyear home near Luke AFB

Example numbers, not market data and not a quote. An airman stationed at Luke AFB uses VA for the first time on a $450,000 home in Goodyear with no down payment, and the VA appraisal comes in at $450,000. VA.gov says there is no down payment "as long as the sales price isn't higher than the home's appraised value," so the price and the value line up here.

Two things jump out. First, the concessions stay under the $18,000 cap even though the seller pays almost $23,000 in total, because the $8,500 of normal closing costs sits in the uncapped bucket. Second, $22,975 is a real number to a seller, so the ask has to make sense next to the price.

What if the seller says yes to the closing costs but no to the funding fee? Then the airman can finance it. The loan becomes $459,675 instead of $450,000. Using the Freddie Mac survey's 30 year fixed average of 7.18% for the week of November 5, 2026, a benchmark only and not a Pillar Mortgage Group rate, principal and interest runs about $3,114 a month with the fee financed versus about $3,048 without it. That is roughly $66 a month, which is often an easier trade than losing the house over the fee.

And if this airman had a disability rating, the fee would be $0. The seller would only need to cover the $8,500 in closing costs plus whatever concessions they agree to, and the offer gets lighter on the seller's side of the table. Plug your own price, down payment and exemption status into the calculator below to see the funding fee and payment for your situation.