Kentucky VA Home Loans · Updated September 2026
VA loans are one of the cheapest ways to buy a home in Kentucky, largely because the VA strictly limits which closing costs a veteran is allowed to pay. Here is what you can and can’t be charged, the 2026 VA funding fee, who is exempt, and how Kentucky veterans regularly close with little or nothing out of pocket.
Quick summary
- The VA limits which closing costs the veteran may pay. Any fee not on the allowable list must be paid by the seller or lender.
- The lender may charge a flat fee of up to 1% of the loan amount instead of itemized processing charges.
- Sellers can pay all of your normal closing costs plus up to 4% in concessions.
- The funding fee is 2.15% for most first-time users with no down payment. It can be financed, and it is waived for veterans receiving disability compensation.
VA allowable vs. non-allowable closing costs
| Allowable: the veteran can pay | Non-allowable: the veteran cannot pay |
|---|---|
|
|
If a fee isn’t specifically allowed, treat it as non-allowable. The lender’s 1% flat charge takes the place of most of the itemized lender fees in the right-hand column.
Seller concessions: normal closing costs plus 4%
On a VA loan, a seller can pay all of the buyer’s normal closing costs (appraisal, title, recording, discount points, and so on), and that doesn’t count toward the concession cap. On top of that, the seller can contribute up to 4% of the home’s value in concessions, which can be used for:
- Prepaid taxes and insurance, and the escrow deposit
- The VA funding fee
- Paying off some of the buyer’s debts to help them qualify
- Temporary buydowns of the interest rate
Combine seller-paid costs, concessions and lender credits, and many Kentucky veterans close with little or no money out of pocket. Kentucky Housing Corporation’s down payment assistance of up to $12,500 can also be paired with a KHC VA loan. More on concessions in seller concessions by loan program.
VA funding fee 2026
The funding fee is a one-time charge that keeps the VA program running without monthly mortgage insurance. It is usually financed into the loan.
| Purchase or construction | First use | Subsequent use |
|---|---|---|
| Less than 5% down | 2.15% | 3.3% |
| 5% to 9.99% down | 1.5% | 1.5% |
| 10% or more down | 1.25% | 1.25% |
| Other VA loan types | Funding fee |
|---|---|
| Cash-out refinance | 2.15% first use / 3.3% subsequent use |
| Streamline refinance (IRRRL) | 0.5% |
| Loan assumption | 0.5% |
| Manufactured home not on a permanent foundation | 1% |
Example: on a $250,000 purchase with $0 down (first use), the fee is $5,375, and it can be added to the loan.
Who is exempt from the VA funding fee?
- Veterans receiving VA compensation for a service-connected disability
- Veterans eligible for compensation but receiving retirement or active-duty pay instead
- Service members with a proposed or memorandum disability rating made before closing
- Surviving spouses who receive Dependency and Indemnity Compensation (DIC)
- Active-duty service members who received the Purple Heart
Your exemption shows on your Certificate of Eligibility. If a disability claim is still pending, tell your lender, because a rating finalized before closing can waive the fee. If the fee is charged and your rating comes through later with an effective date before closing, you can request a refund from the VA.
What else does a Kentucky VA buyer pay at closing?
- VA appraisal: set by the VA’s regional fee schedule, and usually paid upfront or at closing.
- Prepaids and escrow: the first year of homeowners insurance, plus a few months of property tax and insurance reserves.
- Title and recording: lender’s title policy, title exam and county recording fees.
- Optional: discount points to lower your rate, and an owner’s title policy.
For typical Kentucky title, recording and prepaid costs on any loan type, see Kentucky closing costs explained.
VA closing cost FAQs
Can a veteran close on a VA loan with no money out of pocket?
Often yes. With $0 down, the seller paying normal closing costs, up to 4% in concessions for prepaids and the funding fee, and a financed or waived funding fee, many Kentucky veterans bring little or nothing to closing.
Can the funding fee be paid by the seller?
Yes. The funding fee can be paid through seller concessions, and it counts toward the 4% limit.
Is the VA funding fee refundable?
If you’re later awarded disability compensation with an effective date before your closing date, you can request a refund of the funding fee from the VA.
Why can’t I pay the lender’s processing fee?
VA rules protect veterans from junk fees. The lender can charge a single flat fee of up to 1% of the loan amount, and itemized fees like processing, underwriting and document prep are non-allowable for the veteran.
Want a VA closing cost estimate?
I’ll confirm whether you’re exempt from the funding fee and show you how to structure seller concessions so you keep the most cash. Call or text 502-905-3708, email kentuckyloan@gmail.com, or start with the Kentucky VA loan requirements guide.
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