What is the cost of getting a VA loan?


If you are an active service member or veteran, a VA loan could help you finance a home with no down payment and a lower credit score. This type of loan, like other mortgages, has closing costs that can be paid either upfront or as part of the loan itself. Here is what you can expect on a VA loan.



a small house in front of a brick building: VA_closing_costs


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What are VA Loan Closure Costs?

VA loan completion costs are all of the fees associated with obtaining a VA loan. These can include:

  • Origination fee – The US Department of Veterans Affairs (VA) limits this fee to 1 percent of the total loan amount.
  • Sponsorship fee – Most VA loans come with a one-time financing fee that is paid by the borrower. These costs depend on the type of VA loan (such as purchase or refinancing), the total amount borrowed, your down payment, and whether you had a VA loan previously, and range from 1.4 to 3 , 6 percent of your loan. You can finance this fee with your loan or pay it upon completion.
  • Discount points – Borrowers can choose to buy points to lower the interest rate on the loan. “Essentially, these are additional up-front costs that are paid upon completion, which allows you to earn a lower than nominal interest rate,” said Angie Sanders, associate director of production for Veterans United Home Loans.

Other VA loan completion costs can include:

  • Credit check fee
  • Title search and title insurance costs
  • Hazard insurance
  • Property taxes
  • Admission fee

The VA prohibits VA loan borrowers from assessing certain types of fees, says Sanders, including:

  • Registration fee
  • Evaluation fee if arranged by the lender
  • Home inspection fee if arranged by the lender
  • Document creation fee
  • Attorney fee
  • Lock fee for mortgage interest
  • Postage
  • Escrow fee

How high are the VA closing costs?

The VA closing costs can be anywhere from 3 to 5 percent of your loan, but the final amount will ultimately depend on the lender you work with. The law requires your VA lender to provide an estimate of all closing costs associated with your loan within three days of the application and a final closing cost list three days prior to your closing date.

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“VA closing costs are very competitive overall, but closing costs vary from lender to lender,” said Kevin Parker, vice president of field mortgage origination for the Navy Federal Credit Union. “Borrowers can compare a VA loan with a traditional loan to assess the differences.”

Can you include the closing costs of a VA loan?

The VA Funding Fee is the only fee or fee that can be included in an amount of purchase credit. Think carefully about whether it makes financial sense to use this option in the long term.

“The downside is that you finance your closing costs and pay interest on them. So while it helps reduce out-of-pocket expenses, you will have to pay interest on those costs over the life of the loan, ”says Sanders.

Can Sellers Pay the Closing Costs on VA Loans?

The home seller may agree to pay a portion of the buyer’s closing costs, including the financing fee or the commitment fee. Note that sellers always have to pay the brokerage commissions, brokerage fees and a termite report on a VA loan.

“For any sale, most of the closing costs can be negotiated between the buyer and seller,” says Parker. “The same goes for VA loans, but the VA mandates that seller concessions cannot exceed 4 percent of the total loan value.”

This is how you limit your own costs

aside from that negotiate with the seller to pay part of the closing costs, you can reduce your costs by avoiding points, that lower your interest rate but cost you money upfront.

In addition, there are some special circumstances under which a borrower may be exempt from financing fee. These include when the borrower:

  • Living with a disability in connection with their service and compensation for the disability
  • Living with a service-related disability and receiving military pension (instead of compensation)
  • An active Purple Heart recipient
  • A surviving spouse whose partner died in service (and is being compensated) or from a service disability
  • Right to compensation due to a dismissal

You can also try to get more savings by asking your mortgage lender if they have discounts or rebates – some may even waive certain costs if you ask. If possible, try to close your mortgage towards the end of the month as well. This will reduce the amount of daily interest you have to pay.

There may also be some state-level graduation and down payment support programs specifically for veterans. Some cities and counties also offer their own programs. Check with your lender about availability.

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