VA Loan Closing Costs: Understanding the Expenses
Learn about the various closing costs associated with a VA loan, from lender fees to third-party services. Explore all the potential expenses you may encounter on your home buying journey.
Understanding VA Loan Closing Costs
Veterans and military members who qualify for a government-backed VA loan have a great advantage when it comes to financing their homes � no down payment requirements. But what is important to understand is that all loans have closing costs, including VA loans.
To better understand what closing costs are associated with a VA loan, here is what you need to know.
Definition of VA Loan Closing Costs
Closing costs are the cost and fees associated with taking out a loan and closing on a new home. They typically come in two categories: fixed or non-recurring closing costs and recurring costs. Non-recurring closing costs are one-time fees or things that need to be paid before you can move into the house. Often these include appraisal fees, title fees, loan origination fees, credit report fees, and attorney's fees.
Recurring costs are costs that will likely come up after moving into your new home. These may include taxes, insurance, interest, and private mortgage insurance.
VA Loan Closing Costs vs Other Mortgage Types
VA loans may have fewer closing costs than other types of mortgages. This is because the VA does not charge veterans and military members any origination fees, discount points, or underwriting fees. In addition, many closing costs that are typically the responsibility of the borrower with a conventional loan may be paid for by the seller with a VA loan. This helps keep the cost of the loan down and increases affordability.
The VA also limits how much money a veteran can be required to bring to the table on closing day. This amount is 2 percent of the loan amount. This is in contrast to many other types of mortgages, such as FHA or conventional loans, which typically require 3 to 5 percent of the loan amount as a down payment.
Key Points to Remember
VA loans are unique in that they have fewer closing costs and no down payment requirements. However, it is important to remember that there will still be closing costs associated with the loan. These closing costs may be paid by the seller or the borrower, and for most loans, the VA limits how much money a veteran can be required to bring to the table on closing day.
Understanding what closing costs are associated with a VA loan can help ensure that all costs are accounted for and that the veteran is able to take advantage of this great opportunity.