Closing Costs to Expect on Your VA Home Loan

Just like any home mortgage loan, a Veterans Affairs (VA) home loan will require closing costs. However, you may not need to pay them upfront at your closing. You can choose to have them rolled into the amount you borrow and pay them back over the life of the loan. But keep in mind if you do roll your closing costs into the mortgage amount, your monthly payments will be higher and you will pay more in interest.   

How much you’ll pay in closing costs will depend on several factors including the cost of the home, where you live, the lender you choose, the loan length, and which costs will be yours and which will be the seller’s. The VA allows the seller to contribute up to 4% of the loan amount in Seller Concessions in addition to customary closing costs on your behalf. Your real estate agent will typically negotiate this part of the contract. 


Loan-Related VA Closing Costs

• VA Funding Fee

  The VA funding fee is unique to VA home mortgage loans and is charged to cover the cost of guarantees that the VA gives to lenders in case of borrower default. It is based on a percentage of your base loan amount, the type of loan, amount of your down payment and whether or not it’s your first time using a VA home loan. There are many certain circumstances when you won’t be required to pay the fee, such as if you are receiving VA disability compensation, so be sure to check with your lender.

• Origination Charge

  Under VA lending rules, lenders can charge up to 1% of the loan amount to cover the processing and approval of your loan. Some may charge a flat 1%, while others might list a variety of other fees such as postage, document preparation, and notary costs that must add up to less than the 1% of your loan amount.

• Appraisal Fee

  An appraisal fee is charged for a home appraisal to make sure the home you are purchasing is worth the price you are paying. The VA sets the costs for an appraisal and it varies by state.

• Title Insurance Charges

  You do not want to purchase a home and later find out there are liens (the seller owed someone money) or someone else owns part or all of the property. The lender will require you to pay for lender’s title insurance, but you might want to consider paying the one-time fee for owner’s title insurance as well.

• Loan Discount Points

  If you plan to live in your new home for many years, you can consider paying discount points to lower the interest rate. A point is equal to 1% of the loan amount, and they can be rolled into the amount of the loan.

• Recording Fee
  

  To record the purchase of your home with the local registry of deeds, there is a nominal charge.

Non-Loan Related VA Loan Closing Costs

• Prepaid Property Taxes and Homeowners Insurance  
  

  You will have the choice to have your lender hold in escrow your local property taxes and homeowners insurance, or pay them on your own. The lender can include the charges in your monthly mortgage payments and then pay those bills for you. Whether or not you plan to pay them directly, at least a portion of these costs will be due at closing.

• Prepaid Interest    
  

  Your monthly mortgage payment will cover the previous month that you lived in the home. If you close in mid-March, for example, your first payment will not be due until May 1. But you will have to pay interest to cover the time between your closing date and the end of that month.  

Would you like to learn more about closing costs for a new home purchase or a refinance with a VA loan? Turn to our dedicated loan team at NewDay USA. We are a nationwide VA mortgage lender who has been helping active military personnel, Veterans, and their families achieve their financial and housing goals for more than 20 years. Call us today at 800-405-4187 to learn more about any of our VA home loan products.