How Much Are the VA Loan Closing Costs?
If you are an active duty member or veteran, a VA loan could help you finance a home with no down payment and with a lower credit score. This type of loan is accompanied by closing costs like other mortgages, which can be prepaid or as part of the loan itself. Here is what you can expect to pay for a VA loan.
What Are the VA Loan Closing Costs?
The VA loan closing costs are all costs associated with the origin of a VA loan. These may include:
- Original fees – The US Department of Veterans Affairs (VA) limits these fees to 1% of the total loan amount.
- Financing costs – Most VA loans come with a one-time financing fee, paid by the borrower. This cost is based on the type of VA loan (for example, purchase or refinance), the total amount borrowed, your down payment, and whether you have ever had a VA loan, and ranges from 1.4% to 3.6% of your ready . You can finance these costs with your loan or pay them at closing.
- Discount points – Borrowers can choose to buy points to reduce the interest rate of the loan. “Essentially, it’s an additional upfront cost paid at closing, which allows them to get a lower rate than the nominal rate,” says Angie Sanders, associate director of production at United Home Loans for Veterans.
Other VA loan closing costs might include:
- Credit check fees
- Title search and title insurance costs
- Risk insurance
- Property taxes
- Registration fees
The VA prohibits VA loan borrowers from being charged certain types of fees, Sanders says, including:
- Registration fees
- Appraisal fee if ordered by the lender
- Home inspection fee if ordered by the lender
- Document preparation costs
- Lawyer fees
- Mortgage rate freeze fee
- Shipping fees
- Escrow Fee
How much are VA closing costs?
VA closing costs can range from 3% to 5% of your loan, but the final tally is ultimately up to the lender you choose to work with. By law, your VA lender is required to provide a estimate of all closing costs associated with your loan within three days of your request, as well as a finalized list of closing costs three days before your closing date.
“VA closing costs are very competitive overall, but closing costs vary from lender to lender,” says Kevin Parker, vice president of field mortgage arrangements at Federal Navy Credit Union. “Borrowers may choose to compare a VA loan to a conventional loan to assess the differences.”
Can You Incorporate Closing Costs On A VA Loan?
VA finance charges are the only fees or charges that can be incorporated into a purchase loan amount. Think carefully about the long-term financial relevance of taking advantage of this option.
“The downside is that you finance and pay interest on your closing costs, so while this helps reduce out-of-pocket costs, you end up paying interest on those costs over the life of the loan,” says Sanders.
Can Sellers Pay the VA Loan Closing Costs?
The door-to-door seller may agree to pay a portion of the buyer’s closing costs, including finance charges or origination costs, for example. Note that for a VA loan, sellers are still required to pay realtor commissions, brokerage fees, and a termite report.
“In any sale, most of the closing costs can be negotiated by the buyer and the seller,” Parker explains. “The same is true for VA loans, but the VA requires that vendors’ concessions cannot exceed 4% of the total loan value.”
How to limit reimbursable expenses
outraged to negotiate with the seller to pay part of the closing costs, you can reduce your expenses by avoiding points, that lower your interest rate but cost money up front.
In addition, there are certain special circumstances in which a borrower may be exempt from financing charges. These include if the borrower is:
- Living with a service-related disability and receiving compensation for the disability
- Living with a service-related disability and receiving military retirement pay (instead of pay)
- An active-duty Purple Heart recipient
- A surviving spouse whose partner died in service (and is compensated) or from a service-related disability
- Eligible for compensation due to pre-discharge
You can also try to save more money by asking your mortgage lender if they offer any discounts or discounts – some might even waive some costs if you ask. If possible, also try to close your mortgage towards the end of the month. This reduces the amount of daily interest you will have to pay.
There might also be closing cost and down payment assistance programs available at the state level specifically for veterans. Some cities and counties also have their own programs. Check with your lender about availability.