VA Loan Changes on Paying Commissions

In a major policy shift, the Department of Veterans Affairs (VA) now allows homebuyers using VA loans to pay their real estate agent’s commission. This change is designed to keep VA loans competitive in today’s evolving housing market.

Previously, VA rules prohibited buyers from paying agent commissions. Now, that restriction has been lifted, giving veterans and service members more flexibility when making offers.

“Veterans using VA home loan benefits can now pay reasonable and customary amounts for certain charges — including commissions and other broker-related fees — thus ensuring that they remain competitive in the rapidly changing housing market,” said Under Secretary for Benefits Joshua Jacobs. 

Why Did the VA Make This Change?

This update follows a proposed settlement involving the National Association of Realtors (NAR), which could significantly change how real estate commissions are handled.

Traditionally, sellers paid commissions for both their agent and the buyer’s agent. But if that structure changes, VA buyers would have been at a disadvantage because they weren’t allowed to pay their own agent’s commission.

That created a real concern, if a seller had to choose between:

• An offer where they only pay one agent’s commission, or
• A VA-backed offer requiring them to pay both

They might avoid the VA buyer altogether. This policy change helps level the playing field.

“We always want to put Veterans and their families in the best possible position to buy the homes they want, and that’s what this update is all about,” Jacobs added. 

The rule took effect on August 10, 2024 and remains in place today.  

VA Loan Rules for Paying Buyer Broker Commissions

While VA buyers can now pay agent commissions, there are still important guidelines:

• Market conditions must apply: The rule is intended for areas where sellers are not offering or setting buyer-agent commissions through listing services
• Cannot be financed: Commission costs cannot be rolled into the VA loan
• Must be paid in cash at closing
• Asset verification required: Lenders must confirm the borrower has enough funds to cover the commission
• Documentation required:
  • Commission must appear on the Closing Disclosure
  • Buyer-agent agreement must be included in the loan file

The VA also encourages borrowers to negotiate reasonable commission rates with their agents.

It’s worth noting that sellers can still choose to pay the buyer’s agent commission. If they do, the VA does not count it as a seller concession.

Also, seller-paid buyer agent commissions do not count toward the VA’s 4% seller concession limit.

How This Impacts VA Homebuying Costs

This change doesn’t affect the core benefits of VA loans:

• No down payment
• No private mortgage insurance (PMI)
• Flexible credit guidelines
• Funding fee (often financed into the loan)

However, it does impact your upfront costs.

Previously, buyers rarely had to think about agent commissions. Now, you may need to budget for that expense.

For example, if you’re buying a $260,000 home and agree to a 2.5% agent commission:

• Commission cost = $6,500
• This must be paid out of pocket at closing

That’s in addition to any other closing costs you’re responsible for. THe upside is that funds you might have used for a down payment (since VA loans allow $0 down) can potentially be redirected to cover these costs.

What’s Next?

Right now, this rule is temporary.

The VA has indicated it’s working on a more permanent solution, but details haven’t been finalized. For now, this is how VA loans handle buyer-agent commissions.

If you’re planning to use a VA loan, it’s a good idea to work early with an agent who’s open to negotiating commission and understand your potential out-of-pocket costs.

Understanding how this rule works can help you make stronger offers and avoid surprises at closing.