Understanding Va Mortgage Loan Closing Costs
What Are VA Mortgage Loan Closing Costs?
VA mortgage loan closing costs are expenses associated with obtaining a loan that is backed by the U.S. Department of Veterans Affairs (VA). These costs are typically paid by the borrower. These costs can include, but are not limited to, loan origination fees, appraisal fees, title search fees, and title insurance. The VA requires that borrowers receive a good faith estimate of closing costs when they apply for a loan. This estimate is typically provided by the lender or closing agent.
Who Pays for VA Mortgage Loan Closing Costs?
Under the VA’s guidelines, the borrower is primarily responsible for covering closing costs. However, there are some exceptions to this rule. For example, in some cases, the seller may agree to pay some or all of the borrower’s closing costs. Additionally, the VA has set limits on the amount of closing costs that can be charged to the borrower. The VA does not require a down payment from the borrower, so closing costs make up the majority of the upfront costs associated with obtaining a VA loan.
Types of VA Mortgage Loan Closing Costs
The types of closing costs associated with a VA loan will vary depending on the lender. Generally speaking, closing costs can be broken down into two categories: non-recurring costs and recurring costs. Non-recurring closing costs are fees charged by the lender to obtain the loan, such as loan origination fees, appraisal fees, title search fees, and prepaid items. Recurring closing costs are expenses associated with the loan that will be paid over time, such as escrow fees and mortgage insurance premiums.
VA Loan Limit on Closing Costs
The VA places a limit on the amount of closing costs that can be charged to the borrower. This limit is determined by the amount of the loan and the location of the property. Generally speaking, borrowers can expect to pay up to 1 percent of the loan amount in closing costs. However, it is important to note that this limit does not include prepaid items, such as prepaid interest or insurance. Additionally, the VA limits the amount of loan origination fees that can be charged to the borrower.
Negotiating VA Mortgage Loan Closing Costs
Borrowers can negotiate the closing costs associated with a VA loan. In some cases, the lender may be willing to reduce or waive certain fees. Additionally, the borrower can ask the seller to pay some or all of the closing costs. If the seller agrees, this can be a great way to reduce the upfront costs associated with the loan.
VA Funding Fee
The VA Funding Fee is a fee that is charged to all borrowers who obtain a VA loan. This fee is charged to help cover the cost of administering the VA loan program, and it is typically rolled into the loan amount. The amount of the fee is determined by the borrower’s loan type and military status. Generally speaking, the VA Funding Fee ranges from 0.5 to 3.3 percent of the loan amount, depending on the borrower’s circumstances.
Closing costs are an important consideration when obtaining a VA loan. These costs can add up quickly, so it is important to understand what costs are associated with the loan and how they can be reduced. Borrowers should also be aware of the VA Funding Fee, which is charged to all VA loan borrowers. By understanding the costs associated with a VA loan, borrowers can make an informed decision when selecting a loan product.