VA Loan Closing Costs: How Much You Require to Pay?

72% of buyers are worried about affording a home! The closing costs on a home can cost thousands of dollars. This financial burden frustrates buyers, making the dream of homeownership seem out of reach. However, options like VA loans can ease this burden by offering lower closing costs compared to other loans.

The average closing costs on a loan range between 2% to 5%. With a VA loan, you can pay closing costs as low as 1%. Additionally, lenders can cover some of the unavoidable VA loan closing costs that conventional loans require.

You can even get a mortgage preapproval to determine your loan amount and potential closing costs. Before you commence your home-buying journey, calculate all the associated costs now!

What Are VA Loan Closing Costs?

VA loan closing costs is an expense that you need to pay while the closing of a VA loan. These costs include expenses related to ownership transfer and are separate from loan amount.

Moreover, your closing costs fees depends on the lender policy, loan requirements (loan amount, interest rate, and property type) and location. Some lenders might offer lower fees or may even cover some certain costs, while others may have higher fees but offer other benefits. 

To find the best deal, you can compare loan estimates and find lenders nearby who offer competitive terms.

How Much Are VA Loan Closing Costs?

Typically, closing costs on a VA loan is 1% to 6%. For instance, if your mortgage amount is $200,000, then your closing costs might range from $2,000 to $12,000 on a VA loan. Here are closing costs affiliated with VA loans: 

• Funding Fee: The VA funding fee depends on the down payment, type of loan, and whether you are a first-time VA loan applicant. 

• Origination Fee: Your lender asks you to pay around 1% to process the loan application. 

• Appraisal Fee: It depends on the size and location of your property. VA loans require an appraisal to assess the property value.
• Title Fee: It includes title insurance that protects you from property ownership disputes. Fees depend on the property value. 

• Recording Fee: You have to pay these fees to the local government. It involves the government fees related to the purchase of property. 

• Discount Point: You can pay mortgage points to the lender at closing to lower your interest rates.            

• Home Inspection Fee: It includes the fees related to determine the boundaries and physical features of your property. 

• Credit Report Fee: Lenders usually charge this fee to obtain your credit report. 

It’s advisable to get a loan estimate from your VA loan lender. It will help you understand all the expected closing costs. Also, VA loans have rules on what lender fees you must pay such as the origination fee.

How to Pay Closing Costs on a VA Loan?

Unlike other types of home loans, VA loans do not require you to pay the full closing costs. You can use these ways to pay of your closing costs: 

• Seller Concessions: You can ask the seller to pay some seller concession or all amount of closing costs. Generally, this is negotiated in the purchase offer. 

• Roll Into the Loan Amount: VA loan allows you to roll closing costs into your principal amount. You will pay it with your interest rates and reduce upfront costs. 

However, you should discuss these options with your lender and figure out the best way to pay. 

How Are VA Loan Closing Costs Different From Other Loans?

Here’s how VA loan closing costs differ from other loans:

	VA Loans	Other Loans
Eligibility	Veterans, active-duty military, certain spouses	Open to all qualified borrowers. However, some loans are just catered for first-time homebuyers.
Down Payment	No down payment required.	Typically 3%–20%
Non-Allowable Fees	You don’t have to pay attorney fees, settlement fees and broker fees with a VA loan.	Other loans require you to pay non-allowable fees.
Insurance Premiums	You don’t require a private mortgage insurance with a VA loan	You will have to pay private mortgage insurance if your down payment is less than 20%.

VA loans are flexible and facilitate savings on closing costs, accessible by eligible veterans. 

Who Pays Closing Costs on a VA Loan?

On a VA loan, closing costs can be paid by either seller or buyer. However, there are specific limitations on who can pay which costs.

• Buyer: As a buyer you are responsible for certain closing costs like VA funding fee, title insurance, home inspection costs, and lender fees.  

• Seller: The seller can also pay up to 4% of your closing costs, which covers a large portion and is accessible for you to purchase. 

• Lender: Lenders may offer a credit to help pay closing costs, but this is typically compensated with higher interest rate and increased principal amount. 

Bottom Line

VA loan closing costs are often lower compared to conventional loans. You need less upfront cash, because there are limits on what veterans can be charged. Not only this, you can even negotiate with your lender to reduce your closing costs.

While there are fees covered by VA, there are still costs like funding fees that you might need to pay. However, you can roll such amounts in your loan. This also eliminates the immediate impact of higher down payment.

For a streamlined home-buying experience with transparent costs, use Houzeo. Our platform helps you find homes and navigate the closing process with ease. Start now to find your dream home.

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