VA Loan Closing Costs
The VA identifies allowable charges and fees that the veteran borrower can pay as well as closing costs that may be charged for the VA loan.
For any and all of the “Itemized Fees and Charges” selected by VA as defined below, the veteran can pay a maximum of all reasonable and customary amounts. The veteran can also pay a 1% flat charge by the lender in addition to reasonable discount points. There are special requirements that apply to construction, alteration, improvement and repair loans.
Oftentimes veterans believe that closing costs are covered by a VA mortgage. Technically this is not true, however the same effect can be reached through careful structuring of your real estate contract. Here’s how to have minimal to no closing costs.
Closing Costs Built In
The loan amount will be the purchase price or appraised value (whichever is less), plus the VA Funding Fee.
If you want your closing costs covered by the loan, you need to first increase the price. Second, have a requirement that the seller will pay the closings costs and pre-paid expenses equal to the amount by which you have increased the price.
You will have the closing costs paid as part of the deal, as long as the home appraises for the increase price. As the range for most places, closing costs and pre-paid expenses can vary widely with 3% – 5%.
After you have started looking for properties and you want a more specific number in this regard, if you have an interest in a particular property, we can provide you with a Good Faith Estimate.
What Fees Are Reasonable and Customary
All itemized fees and charges are determined reasonable and customary by each local VA office. All other costs in the transaction (considered non-allowable) are generally paid by the seller when purchasing a new home or by the lender when refinancing your current VA mortgage.
Itemized fees and charges include some of the following: paying a VA Appraiser and VA compliance inspectors, paying for the credit report obtained by the lender, paying for the hazard insurance premium, paying for recording taxes or other charges incident to recordation, or paying a charge for a survey, if required by the lender.
Other fees are authorized by the VA.
Many of the items can be paid for by the seller of the home and can be negotiable when presenting an offer on a home to the seller. So when reviewing allowable borrower fees and charges, please consult with your Real Estate Professional handling the transaction.
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