There are a lot of things that factor into closing costs, and these can be extremely confusing – but don’t worry! Here’s a quick reference to give you a basic overview of possible charges that are exempt by the VA. With VA home loans, there are regulations on how much a lender can charge on certain fees, and there are some fees that don’t ever get charged. Find out what fees to expect, and which ones to watch out for!
Closing Costs You Don’t Pay…
Because of your service in the military, there are some fees that you don’t have to pay on your VA home loan no
matter what. The VA does not allow lenders to charge fees for documentation, notary, the transaction coordinator, or for the broker. Although you do have to pay the recording fee, the VA does not allow lenders to charge more than $17 for this. Depending upon the state you live in, you won’t have to pay termite and pest inspection fees either. Only nine states require you to pay inspection fees regardless of how you’re financing your home: Alabama, Arkansas, Arizona, California, Florida, Louisiana, Mississippi, Oklahoma, and Texas.
VA Fees You Might Pay . . .
Possible costs you might pay at closing include those for escrow, title exams, insurance, survey, VA funding, and Homeowners Association. Escrow is a portion of the mortgage payment that goes towards paying property taxes and insurance costs, also called TI. The escrow expense can vary over time because it is charged based on property taxes, which also change over time.
Survey fees include the cost of a survey company inspecting and confirming property lines. This expense isn’t required in all states, so it’s important to check if your state exempts those financing their homes with VA loans from paying survey fees.
Funding fees are required by the VA whenever you are purchasing or refinancing with a VA loan. This fee is applied to all loans and refinances, and the amount charged depends on a number of factors, including what the loan will be used for and if the borrower has used a VA loan previously. You can be exempt from paying the VA funding fee if you have been disabled due to military service. Members of the Army, Air Force, Navy, Marine Corps, and Coast Guard pay lower VA funding fees than members of the National Guard and the National Reserves.
Your Closing Costs Total Comes To…
The list of closing costs you could possibly be charged may seem lengthy and overwhelming, but don’t worry; the Department of Veterans Affairs has placed restrictions on how much lenders can charge you for closing, and there are two ways that lenders can collect closing costs. The first is by charging an origination fee that is no more than 1 percent of the loan amount. For example, if your loan is $200,000, your origination cost can be $2,000. The 1 percent origination fee will cover all closing expenses.
If your lender chooses not to charge the 1 percent origination fee, he or she might choose to charge any combination of the costs listed above. However, if your lender chooses this option, they cannot charge you more than the 1 percent you’d be paying if they charged the origination fee. Some home sellers are willing to help cover closing costs too, and the VA does not have regulations on how many of those fees can be paid for by the seller. Ask your home seller if they are willing to negotiate covering some of the closing costs.
Here at Low VA Rates, we strive to make the loan process and closing costs easy to understand. To speak to one of our qualified loan officers, or to learn more about the services we offer, visit us online at www.lowvarates.com.