The seller can pay all usual and customary closing costs (deed transfer, title, etc). Here's the confusion. The seller can also pay the escrow and prepaids up to 4% of the sales price. So if the sales price is 100,000, and the escrow and prepaids add up to 3,000, the seller can pay that as well. If the escrow and prepaids add up to 4,500 - the seller is limited to 4,000.

Thanks Ed for responding. I feel a lot better now. I think I totally understand it now, and it is such a great deal, I don't understand why more veterans are not taking advantage of it. Any vets out there looking in my areas give me a call.

Adrienne,
You are right on the money. If you structure this properly and word it specifically, the seller can pay just about everything for a VA buyer.

Thanks for responding. I tried calling my regional VA center to no avail. So i educated myself and my lender, that the answer is YES, you can have more than 4%. Here's a few guidelines below.
2. The 4% can be much more than 4% and here's how:

Seller concessions do not include

payment of the buyer's closing costs, or
payment of points as appropriate to the market.
· Seller concessions include but are not limited to the following:

payment of the buyer's VA funding fee
prepayment of the buyer's property taxes and insurance
gifts such as a television set or microwave oven
payment of extra points to provide permanent interest rate buydowns
provision of escrowed funds to provide temporary interest rate buydowns, and
payoff of credit balances or judgments on behalf of the buyer.

I do my share of VA loans, but I am not sure. I would suggest contacting the VA regional center nearest you, and printing whatever response you receive. The lender can then use the documentation to support the loan file regardless of outcome. I have had pleasant experiences and quick turn times when dealing directly with HUD(FHA), USDA, and VA.
Good luck!
http://www.homeloans.va.gov/rlcweb.htm