VA Home Loans Closing Costs: Who Pays Them & What To Expect?

VA Home Loans Closing Costs: Who Pays Them & What To Expect?

The VA home loan program, offered by the US Department of Veterans Affairs, is a military benefit allowing eligible Veterans and active military members to buy their home at no down payment. These hard-earned military benefits also come with no PMI requirements. However, one thing most Veterans often ponder upon is the VA home loan closing costs.

Who is liable to pay them, and how much is it?

If you are looking for the same, you are on the right page. Read on to explore what exactly is VA closing costs when it comes to applying for a VA loan.

What Are VA Home Loans Closing Costs?

Generally speaking, any time you apply for a mortgage, you will have to run into closing costs. In short, this cost is a payment you pay to the lender for their assistance.

Note that “closing costs” are generally broader terms and might include several breakdown costs underneath. This might also include the appraisal fee, documentation charges and title search charges.

For Veterans applying for a VA mortgage, they would have to pay VA closing costs while signing the final paperwork for the loan. During this closing time, you would have to pay the closing costs and downpayment, if any.

VA Home Loan Closing Costs: How Are They Different?

Because the VA home loan process differs from the conventional mortgage process, VA closing costs are also different. Here’s how VA closing costs differ from those of conventional mortgages.

Non-Allowable Fees
When you choose to apply for a VA loan, there are certain charges the lender can not expect you to pay. These charges are known as non-allowable fees. This might include prepayment penalties, attorney fees and settlement charges.

Unlike a VA loan, conventional mortgages may require the applicants to pay attorney fees and settlement charges. However, you can avoid such charges if you go for a VA loan.

Generally, VA home loans funding fees include credit report fees, discount points, title insurance, recording fees and VA funding fees.

Limited Origination Charges
Generally, if you apply for any mortgage, you would have to pay mortgage origination fees for processing the loan and its underwriting. However, VA-approved private lenders can only charge 1% of the total loan amount as origination fees for a VA loan.

VA Funding Fees Limits & Exemptions
VA funding fees are the cost you pay to the VA to support the continuation of VA loan benefits. The cost of VA funding fees generally depends upon the type of mortgage (home purchase/refi) you are applying for.

This fee might also depend upon if you are paying any down payment or not. Though the VA does not require you to make a downpayment for a VA loan, if you make a downpayment, you would have to pay lower A funding fees.

Moreover, there are cases where you can be totally exempted from VA funding fees. You are not liable to pay funding fees if you meet any one of the following conditions:

You are eligible to receive or receive VA compensation for a service-related disability.
You are a surviving spouse of a Veteran who lost their lives on duty or due to a service-related disability.
You are a Purple Heart recipient.

VA Appraisal Fees
In every kind of mortgage, you are most likely to pay an appraisal fee. In the case of VA home loans, you are expected to pay an appraisal fee of somewhere around $425-$875.

Discount Points
If you buy a discount point, you’re most likely to cover all the VA home loan closing costs.

The Takeaway

If you are a Veteran, taking advantage of this hard-earned military benefit can be a great deal. With VA loans, you can go on and buy your new house rather than saving for a downpayment. This is why a VA loan is one of the best military benefits offered to Veterans and other service members.

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