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VA LOAN Closing Costs And Fees
VA Loan Closing Costs & Fees
Like every mortgage, the VA loan comes with closing costs and related expenses. VA loan closing costs can average anywhere from 3 to 5 percent of the loan amount, but costs can vary significantly depending on where you're buying, the lender you're working with and more. For many homebuyers, closing costs are one of the most confusing parts of this entire journey.
In fact, “closing costs” is really a catchall term. There are all different kinds of costs and fees that can be part of finalizing this process. In the mortgage world, you’ll also hear these referred to as “settlement charges.”
Some of these costs represent the actual costs of doing a loan. Others involve expenses likehomeowners insuranceand property taxes. Some need to be paid before you get to the closing table, while others can wait until that happy day arrives.
Your closing costs will vary depending on a host of factors, from your lender and loan type to the location and more. With VA loans, this program actually limits what buyers can pay in closing costs. In fact, there are certain costs and fees that VA buyers aren’t allowed to pay.
Who pays what in closing costs and concessions is always up for negotiation. It’s important to understand that sellers aren’t obliged to pay any costs on your behalf. But you can always request that the sellers pay a portion or all of the closing costs when you’re making a formal offer on a home.
Let’s first take a look at the different kinds of loan-related costs you’re likely to encounter.
VA Loan-Related Closing Costs
Here’s a rundown of some of the common loan-related closing costs:
Origination charge:The VA allows lenders to charge up to 1 percent of the loan amount to cover origination, processing and underwriting costs. They can choose to either charge you a flat 1 percent origination fee, or pick and choose among a host of fees, so long as they add up to no more than 1 percent. If the lender isn't charging the flat 1 percent fee, then VA buyers can pay somefees and charges that would otherwise be unallowable.
Appraisal fee:VA buyers are required toget an appraisal. Appraisals typically run about $525, but costs can vary significantly depending on where you're buying. The VA sets the costs for appraisals, not the lender. This is a cost buyers will have to pay upfront. You can get a look at the current appraisal fees for your state at theVA's website.
Title charges:Title insurance protects lenders and homebuyersif liens, legal defects or other title-related issues are discovered after closing. Lenders will usually require the purchase of lender’s title insurance, which only protects their interest in the property. You should strongly consider paying the one-time fee for owner’s title insurance to ensure you’re covered as well.
Discount points:Buyers can pay “points” to lower their interest rate. A point is equal to 1 percent of the loan amount. You’ll also hear this called a “permanent buydown,” because you’re paying money upfront to buy a lower interest rate.This isn’t something many VA buyers do, but it’s an option and a loan-related cost.
Credit report:Some lenders may charge a fee for accessing your credit information. Generally, the VA says this cost shouldn’t exceed $50.
Well, septic and termite inspection fees:Buyers may need some or all of these depending on the property. In all but nine states, VA buyers aren’t allowed topay the termite inspection fee, which in most cases is covered by the seller. Butbuyers may be able to pay for any repairsstemming from well, septic or termite issues.
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