Who Pays Closing Costs on a VA Loan?

If you’re a veteran using a VA loan to purchase a home, you may be wondering who pays closing costs. The answer is that it depends on the type of loan you’re using. For a regular VA loan, the seller usually pays the closing costs. However, if you’re using a VA streamline loan, the buyer is responsible for the closing costs.

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Introduction

The Department of Veterans Affairs (VA) guarantees a loan made by a private lender, such as a mortgage company or bank, to eligible veterans. The guarantee means the lender is protected against loss if you or a later owner fail to repay the loan.

To be eligible for a VA-guaranteed loan, you (or your spouse) must have sufficient service during wartime or peacetime as specified by VA regulations. You also must have been honorably discharged from active service, unless still serving on active duty. In addition, you must either be currently serving in the active military, National Guard or Reserves, be a qualifying former reservist or National Guard member, or be the surviving spouse of a veteran who died while in service or as a result of service-related injuries.

For buyers using the VA loan program to purchase a home, there is no limit on how much they can borrow. Buyers may finance their closing costs and purchase discount points with their loan as well.

Who Pays Closing Costs on a VA Loan?

If you’re a veteran using a VA loan to purchase a home, you’re probably wondering who will be responsible for closing costs. The answer is that it depends on the situation. In some cases, the buyer may be responsible for closing costs, while in others, the seller may be responsible. Let’s take a look at some of the factors that can affect who pays closing costs on a VA loan.

Buyer

Closing costs are fees charged by lenders for originate a loan. These fees can be paid by the buyer, seller, or split between the two parties. On a VA loan, who pays closing costs is negotiated as part of the home purchase transaction.

As a general rule, buyers should expect to pay between 2-5% of the loan amount in closing costs. This can add up to several thousand dollars on a typical VA loan, so it’s important to factor this into your budget when shopping for a home.

Sellers are also allowed to contribute towards the buyer’s closing costs, but there is a limit of 4% of the sale price. This means that even if the seller pays all of the buyer’s closing costs, the buyer will still need to come up with at least 2% out of pocket.

In some cases, it may be possible to have the lender cover all or part of the closing costs. This is known as a “no-closing cost” or “zero-closing cost” loan. While this may sound like a great deal, it’s important to remember that these loans usually have higher interest rates and/or origination fees which can offset any savings from not paying closing costs upfront.

When you apply for a VA loan, your lender will give you an estimate of all mandatory and optional fees that will need to be paid at closing. This estimate is called a Good Faith Estimate (GFE) and it will provide you with an appliance list of all anticipated lender charges. Be sure to compare this GFE against other lenders before selecting one to work with.

Seller

The seller is responsible for paying for the property taxes at closing and estoppel fees, if any. If the seller is paying any of the buyer’s loan-related closing costs, such as origination points, the seller must pay these costs in addition to the other sellers’ closing costs. (Learn more about who pays closing costs on a VA loan.)

Lender

The lender is typically responsible for paying for the following fees and services:
– origination fee
– credit report
– flood certification fee
– tax service fee
– title insurance binder
– title insurance policy
– recording fees
– survey (if required)
– appraisal (if required)

How to Reduce Closing Costs on a VA Loan

Closing costs can be one of the most difficult aspects of getting a VA loan. They can add up quickly, and if you’re not careful, they can eat into your equity. There are a few things you can do to reduce closing costs, though.

Get a Loan Estimate

Eager to lower your closing costs on a VA home loan? Before you get too far into the process, make sure you obtain a Loan Estimate from at least three different lenders. This document, which is required by the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure Rule, will give you a good idea of what kind of fees you can expect to pay at closing.

To get a Loan Estimate, provide the lender with detailed information about the home you’re interested in purchasing, as well as your military service history and current financial situation. The lender will then create an estimate of the loan terms they could offer you, as well as an estimate of the closing costs you can expect to pay.

When comparing Loan Estimates from different lenders, be sure to pay attention to the following:

· Origination charges: This is the fee the lender charges for processing your loan application. It can be expressed as a percentage of the loan amount or as a flat fee.

· Discount points: Also known as “loan origination points” or “discount fees,” these are optional fees that can be used to buy down your interest rate. Each point costs 1% of the loan amount.

· Underwriting fees: These are charged by the lender for evaluating and approving your loan application.

· Appraisal fee: The lender will order an appraisal of the home you’re interested in purchasing in order to confirm that it is worth at least as much as the purchase price. You will be responsible for paying for this appraisal out of pocket.

Compare Loan Estimates

The next best way to reduce closing costs is by shopping around for the best deal on your VA loan. Loan estimates are free, so take advantage of them.

Lenders are required by law to give you a Loan Estimate for free within three days of receiving your application. The Loan Estimate will include a breakdown of all the costs associated with your loan, so you can compare offers and make sure you’re getting the best deal.

If you have time, get estimates from at least three different lenders so you can compare them side-by-side. Remember to look at more than just the interest rate when comparing loans.

Negotiate Closing Costs

If you’re a veteran using a VA loan to purchase a home, you may be wondering about the closing costs associated with your loan. You may also be wondering who pays closing costs on a VA loan.

The good news is that you can negotiate with your lender to have some or all of your closing costs paid for by the seller. This is known as a seller concession.

The amount of the seller concession depends on the lender, but it is typically between 2% and 6% of the purchase price of the home. So, if you’re buying a $200,000 home, the seller could pay up to $12,000 in closing costs on your behalf.

If you’re unable to get the seller to pay your closing costs, there are other ways to reduce the amount you have to pay out-of-pocket. One way is to ask the lender for a no-closing cost loan. This type of loan doesn’t require you to pay any upfront fees, but it typically has a higher interest rate than a traditional loan.

Another way to reduce your closing costs is to choose a lower interest rate. This will lower your monthly payments, but you’ll end up paying more in interest over the life of the loan.

You can also choose to finance your closing costs into your loan amount. This will increase your monthly payments but will help you avoid paying any upfront fees out-of-pocket.

Finally, you may be able to get some of your closing costs paid for by the Department of Veterans Affairs. The VA offers a limited number of grants each year that can be used toward closing costs or other homeownership expenses like repairs or renovations.

Conclusion

The truth is that there is no one definitive answer to this question. Who pays closing costs on a VA loan can vary depending on a number of different factors, including the type of loan, the lender, and the borrower. Ultimately, it is important to discuss your options with your lender to determine who will be responsible for paying these costs.