How do VA seller concessions and closing costs work in Colorado Springs?

On a VA loan, a seller can pay all of your normal closing costs, and on top of that can give concessions worth up to 4% of the home's VA reasonable value. Concessions include paying your VA funding fee, prepaying your property taxes and insurance, paying off a debt, or buying down your rate. A seller paying your agent's fee doesn't count toward the 4%. Whether a seller agrees comes down to their bottom line, so the strongest request is one your loan officer has already confirmed you can use.

Closing costs and concessions are two different things

VA treats these as two separate buckets, and that's the part most people miss.

Normal closing costs are the usual costs of getting the loan and closing: the lender's origination fee, normal discount points, the VA appraisal, title insurance, recording fees, and similar items. VA says it doesn't limit seller credits for a loan's closing costs.

Concessions are anything of value the seller adds to the deal at no extra cost to you, beyond what a seller is customarily expected to pay. VA's lender handbook lists examples:

• paying your VA funding fee
• prepaying your property taxes and homeowners insurance
• paying extra points for a permanent rate buydown, or funding a temporary buydown
• paying off your credit balances or judgments
• gifts, like an appliance

Concessions are capped at 4% of the home's reasonable value, the value on the VA appraisal, not the price you agreed to. Normal closing costs don't count toward that 4%.

What about your agent's fee?

Under VA's 2024 guidance, a seller paying your buyer's agent is not treated as a seller concession, so it sits outside the 4%. If you pay your own agent, VA allows a reasonable and customary amount, but it can't be rolled into the loan, and your lender counts it in the cash you need to close. VA's rules on agent fees have changed since 2024, so confirm the current treatment with your lender. How buyer agent fees work now covers the bigger picture.

How the VA funding fee fits in

Unless you're exempt, VA charges a one-time funding fee. As of October 2026, on a purchase with less than 5% down, it's 2.15% of the loan the first time you use your benefit and 3.3% after that; 5% or more down lowers it.

VA's guidance says the fee can be paid in cash or added to the loan, and a seller paying it counts as a concession. How a seller's credit gets applied to the funding fee is something to work out with your lender. Veterans who receive VA disability compensation are exempt from the fee, so a seller's credit for them goes toward other costs instead.

A simple example

Hypothetical, for illustration only. A Colorado Springs home with a VA reasonable value of $450,000, a first-time VA buyer, and no down payment:

The real numbers come from your lender's Loan Estimate, not a page like this one.

What I see VA buyers use concessions for

In my experience, VA buyers most often use concessions for prepaid items and other costs the lender allows. That's why the loan officer matters so much here. A good one is doing an optimization: figuring out the best way to use whatever the seller agrees to.

It's possible to negotiate a credit that's larger than the costs it's allowed to cover. When that happens, the extra usually has to be reduced, often by lowering the price instead, or it goes unused. I haven't had that happen, and the lenders we recommend are careful to work it out before the offer is written, but it's the reason the amount should come from your lender, not a guess.

How I approach it when writing a VA offer

It's all about what the buyer needs. Before we write an offer, I call the loan officer to see what's needed, and I recommend you run the different options with them until you're comfortable: more toward closing costs, more toward a buydown, a lower price instead. The goal is to put you in the position you're comfortable with and want, and nothing less.

How sellers look at it

From the seller's side, it comes down to the bottom line. A VA buyer can ask for up to 4% in concessions, plus closing costs, and the seller looks at what they'll net and decides whether they're willing to accept it. How seller concessions work in Colorado Springs explains why a credit and a price cut land close to the same for a seller, and lower price versus better terms walks through how sellers compare offers.

The Colorado contract piece

In Colorado's standard purchase contract, a seller concession may be used for any buyer fee, cost, charge, or expenditure to the extent the buyer's lender allows it. In other words, the contract defers to your lender and to VA's limits. In a market like Colorado Springs, with several military installations and a lot of VA buyers, sellers and listing agents are generally familiar with VA requests, so a well-supported request is a normal part of negotiating.

How to decide what to ask for

• If cash to close is your main concern, ask your lender how much a seller credit toward closing costs and prepaids would save you up front.
• If the monthly payment matters most, ask whether a buydown inside the 4% would help more than a lower price.
• If you're exempt from the funding fee, plan to use any credit for other allowable costs instead.
• If the seller may get other offers, keep the request to what you actually need, and back it with your lender's numbers.

What could change the answer

• VA changes to the concession rules, funding fee rates, or agent-fee policy.
• An appraisal that comes in below the price, which lowers the 4% limit; what happens if a VA appraisal comes in low covers that.
• Your funding fee exemption status.
• Your lender's own rules on how credits can be applied.
• How competitive the home is and the seller's own bottom line.

When to talk with a professional

Your VA-experienced loan officer is the one to confirm your closing costs, your funding fee, and how much a seller credit can actually be used for; choosing a lender for a VA loan covers what to look for. A real estate professional who knows VA purchases can help you turn those numbers into an offer a seller will take seriously. For tax questions about points or a buydown, ask a CPA.

Sources

• U.S. Department of Veterans Affairs, VA funding fee and loan closing costs: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
• U.S. Department of Veterans Affairs, Circular 26-24-14, Temporary Local Variance for Certain Buyer-Broker Charges (June 2024): https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-24-14.pdf
• U.S. Department of Veterans Affairs, VA Pamphlet 26-7, Chapter 8, Borrower Fees and Charges and the VA Funding Fee (seller concessions, Topic 5), as summarized by Scarpero: https://scarpero.com/va-handbook-chapter-8-borrower-fees-funding-fee/
• Colorado Division of Real Estate, Contract to Buy and Sell Real Estate (Residential), CBS1, § 4.2 Seller Concession: https://dre.colorado.gov/real-estate-broker-contracts-and-forms