How Much Are VA Closing Costs, And How Can I Minimize Them?
There are certain costs in obtaining a VA loan, just as with any other type of loan. Veterans sometime believe that these costs are included in the VA mortgage. Although this is not the case, it can be accomplished with a careful structuring of your real estate purchase contract.
On a typical offer to purchase, buyer and seller agree to a purchase price and then the buyer gets a loan for that amount, less whatever down payment is required. When purchasing the home with a VA home loan, the VA will finance up to 100% of the agreed purchase price, plus the VA funding fee. So if you would like to include most or all of your closing costs in the loan, you must increase your offer by the estimated amount of the closing costs, and have a stipulation that the seller will pay those closing costs and pre-paid expenses up to the amount that your offer was increased.
Closing costs and pre-paid expenses vary, but will typically be anywhere from 3% - 6% of the purchase price. The VA Loan Place can provide you with an estimated closing costs worksheet to help you properly structure your real estate contract prior to finalizing your offer.
What Closing Costs Will I Be Required To Pay With My VA Home Loan?
One of the many advantages of VA home loans is that the VA strictly limits the closing costs that may be charged to the veteran. There are many fees that the veteran is not allowed to be charged, which serves to lower the overall cost of obtaining a loan, therefore saving the veteran substantial amounts at closing. These fees that the VA disallows are often referred to as “non-allowable”, or “junk fees”. Following is a list of fees normally allowed by the VA that would be typical charges you can expect with your transaction, and a separate list of “non-allowable” fees that you should not be charged.
VA Closing Costs The Veteran Is Allowed to Pay
- 1% flat charge by the lender, plus reasonable discount points
- Appraisal and compliance inspections - including pest inspections, water well, septic, etc.
- Recording Fees - Fees and taxes incident to recording
- Credit Reports - Only the actual cost of credit reports and any supplements
- Prepaid Items - Includes pro-rations for property taxes, insurance, and initial escrow deposits as required by lender
- Insurance - The first years hazard insurance must be paid at closing, plus flood insurance if required.
- Flood Certification- A third party verification to determine if a property is located within a special flood hazard area
- Survey - If required by lender
- Title Examination and Insurance - Required to protect both veteran and lenders security in the property
- VA Funding Fee - Unless exempt each veteran must pay a funding fee to VA. A veteran is exempt from the funding fee if they have a service related disability of 10% or higher.
- Miscellaneous Fees Authorized by the VA - Due to local variances, lenders may request the VA to approve certain fees if (a) they are normally paid by the borrower in a certain area, and (b) they are considered reasonable and customary in the area
Items that cannot be charged to the veteran
- Administrative fees
- Loan closing or settlement fees
- Document preparation fees
- Document preparation or conveyance fees
- Attorneys fees other than for title work
- Rate lock-in fees
- Rate lock-in fees
- Escrow fees or charges
- Notary fees
- Underwriting fees
- Loan application or processing fees
- Brokers fees
- Tax service fees
Ready to get started?
Call and speak to one of our VA loan specialists today. The toll-free number is (866) 704-2826. You can also complete our safe, secure online request form. There is no obligation to you, and no cost to apply. You will be contacted by VA loan specialist who will assist you with each step from start to finish.