Do you want to understand VA loan costs while shopping for a VA home loan? I'm glad you landed on this page. As with any home loan, you need to understand the costs involved. On this page, you'll get a brief overview about the various costs for a VA loan along with some other resources you may find helpful.
There are a lot of expenses involved in closing a VA Home Loan. Since
these are U.S.
If you think you are ready, be sure to get a lender who is familiar with working with this mortgage option.
Government backed home loans and because you have served in the past or may even be on active duty, most of these different VA loan costs can be paid by others rather than yourself.
Even though these costs are kept as low as possible, it still cost money to actually close on a VA home loan.
So, why don't you and I take a few minutes and figure out what the actual costs are that you have to pay and the ones we can get others to pay for you.
First of all, understanding how the VA home loan works will help you understand the costs involved.
When you apply for a VA loan, what you are actually doing is asking the U.S. Government to guarantee to the lender you choose, that they will get their money back. So in other words, the risk to the lender becomes zero and the U.S Government assumes all the risk for the mortgage loan. The lender will make money for originating and servicing the loan.
The VA loan costs only become part of the process after the mortgage is written by the lender which has been approved by the U.S government. One thing you need to realize is that the down payment may be zero on a VA home loan but the VA Funding Fee can become one of the rather large loan costs involved. Also there are other associated cost with the loan as we will discuss below.
The VA funding fee may be waived if you have been wounded in the line of duty. You will need VA Form 26-8937, Verification of VA Benefits, indicating your exempt status. Now if this is not the case, it can be rolled into your mortgage. This fee can amount to as much as 2.15% of the mortgage amount.
The requirements for a VA home loan are discussed on another page on our website. Click here to learn more about VA Home Loan Eligibility requirements. We have an entire section of this website devoted to that subject.
The federal government created VA loans during the 1940s in their effort to help returning military personnel to be able to enjoy home ownership. Low VA loan costs took effect during this establishment phase and they have remained low ever since. For the most part you can expect very little out of pocket money if you negotiate your deal properly. Since you're reading this website, you can learn how to do that.
VA loans for housing can be taken out for new construction or for purchasing a existing structure.
Even though lenders are limited on the fees they collect for VA loans, if they are going to be able to continue to participate in such programs, there are still some costs that must be incurred by the borrower.
Here are some common fees that may be encountered.
These are just some of the costs that veterans can be asked to pay on a VA housing loan, but you may be surprised to learn that you will not be asked to pay mortgage insurance premiums. Most of the VA loan costs listed above can be paid by the seller if you work this deal right.
Here are few other rules set by the VA that lenders have to work by:
The lender sets interest rate, discount points and closing cost. The VA may limit what they charge, but the costs are determined by the lender and then approved by the VA. The rates for these closing costs may vary from lender to lender.
One of the nice things about this type of loan is the fact the seller can pay some or all of your closing costs. These are known as seller concessions and cannot exceed 4% of the sales price. Some of these fees that can be paid by the seller are: pre-paid costs, VA funding fee and even some judgments for the veteran. Again, this takes a loan officer that knows what he is doing to make it work.
I personally recommend rolling the VA funding fee into the mortgage (if you are not disabled while in the service) and using the entire 4% to pay all of your other closing costs.
I'll never forget the time I did a VA loan for a disabled veteran. Because I was in front of the deal by getting him pre-qualified before ever making an offer on a home he bought a $60,000 house with only $400 of money out of his pocket. I was able to coach him how the offer to purchase should be worded. The real estate agent was on board with us and it worked out great.
What you need is a lender that understands how the VA loan costs works and help you structure the offer to purchase. Just be sure to ask them questions about working with a borrower and using the seller concessions to pay all or most of your VA loan costs.
However, you can expect to pay some reasonable VA loan costs. I'm certain if you work at this, you also can find a great deal where you have very little money that you have to pay out of your own pocket.
If you have any questions on these VA loan costs, or any other fees, please contact me.
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