What You Actually Pay Out of Pocket Before Closing Day
Jeanette Spain
21-year Air Force veteran. Central Texas Realtor.
The short answer
Option fee, earnest money, home inspection, VA appraisal. On a typical Central Texas VA purchase, that's $1,000 to $2,000 in pre-closing out-of-pocket costs that don't come back — plus earnest money that credits at closing and an option fee that does too. Here's what each line means.
The four pre-closing costs
- Option fee: $100 to $250 paid to the seller for an unrestricted right to terminate during the option period (typically 7–10 days). Non-refundable, but credited toward purchase price at closing.
- Earnest money: 1% of purchase price is standard. Held by the title company. Refundable during the option period, at risk after option period ends. Credits toward your cash-to-close.
- Home inspection: $400 to $600 for a general inspection. Not refundable, not credited. Essential regardless of loan type.
- VA appraisal: $600 to $700, ordered by the lender, paid by the buyer. Required on every VA loan. You do not choose the appraiser — the VA assigns one from a regional panel.
What comes back at closing
The option fee typically credits toward closing costs or purchase price. Earnest money applies to your cash-to-close. The net of those two items is roughly zero — they just move from your pre-closing account to the closing settlement statement. The real pre-closing money that doesn't come back is the inspection and appraisal: roughly $1,000 to $1,300 on most transactions.
Budget the inspection and appraisal as costs you'll spend regardless of whether the deal closes. If you terminate during the option period, the earnest money comes back but the inspection and appraisal money is gone. That's the cost of due diligence — not a penalty for walking.
What seller concessions can cover
VA loans allow sellers to contribute up to 4% of the purchase price toward concessions: closing costs, prepaids (homeowner's insurance, property tax reserves into escrow), and the VA funding fee. A motivated seller in a slow market can significantly reduce your cash-to-close. Negotiating concessions as part of the offer is part of the strategy conversation we have before you submit.
Prepaids are not closing costs
Buyers frequently confuse prepaids with closing costs. Prepaids are your first year's homeowner's insurance premium, property tax reserves deposited into escrow, and prepaid interest (days from closing to the end of the month). These are real costs, but they're building reserves you'll use. They're also typically coverable under seller concessions, which is another reason to negotiate that up front.
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