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 is responsible for paying closing costs. In most cases, the seller will pay for the majority of the closing costs, but there are some costs that the buyer is responsible for as well.

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Who Pays Closing Costs on a VA Loan?

When you get a VA loan, you’re not required to pay any closing costs. That’s one of the many benefits of this type of loan. The seller also can’t ask you to pay these costs. However, there are some costs that you may have to pay. Let’s take a closer look at who pays closing costs on a VA loan.

Buyer

The buyer is generally responsible for paying for the following closing costs:
-Origination fee: This is a fee charged by the lender for processing the loan. It is generally a percentage of the loan amount, and can vary depending on the lender and type of loan.
-Discount points: These are fees paid to the lender at closing in order to lower the interest rate on the loan. One point equals one percent of the loan amount.
-Appraisal fee: The lender will order an appraisal of the property in order to determine its value. This fee is generally paid upfront, and is usually around $300-$400.
-Credit report fee: The lender will pull a credit report in order to assess the borrower’s creditworthiness. This fee is generally paid upfront, and is usually around $30-$50.
-Title insurance: This insurance protects the lender against any claims that may arise from title defects on the property. The cost of this insurance varies depending on the price of the home and other factors.
-Recording fees: These are fees charged by local governments for recording documents related to the loan, such as the deed of trust or mortgage. These fees vary depending on local rules and regulations.
-Survey fee: A survey of the property may be ordered by either the buyer or lender in order to confirm property boundaries. The cost of this survey varies depending on the size and location of the property.

Seller

The seller can pay all of the veteran’s closing costs, up to 4% of the loan amount. This is a great way to reduce your out-of-pocket expenses at closing. If the seller does not want to pay all of your costs, you can negotiate who will pay which costs.

Lender

The Veterans Affairs (VA) doesn’t limit how much a lender can charge in closing costs, so the fees may be higher than what you’d pay with another type of loan. That said, you may be able to negotiate some of the fees with your lender. Or, some sellers are willing to pay a portion of the buyer’s closing costs.

Lenders are required to give you a Loan Estimate, which outlines the anticipated closing costs for your loan, within three days of receiving your loan application. Review this document carefully so you understand which fees are mandatory and which are negotiable.

Here are four common closing costs that lenders typically charge:

Origination fee: This is a fee charged by the lender for processing your loan application. It is typically expressed as a percentage of the loan amount, and can range from 0.5% to 1% (or more). For example, on a $200,000 loan, an origination fee of 1% would be $2,000.
Discount points: Discount points are optional charges that you can pay to get a lower interest rate on your loan. Each point is equal to 1% of the loan amount. So if you’re taking out a $200,000 mortgage and decide to buy two discount points (2% of $200,000 = $4,000), your total closing costs would be $6,000 ($2,000 in origination fees + $4,000 in discount points). If you plan on staying in your home for more than 10 years or so and think you’ll save enough in interest to offset the upfront cost of buying points, it could make sense to do so.
Appraisal fee: The appraisal is an important part of getting a VA loan because it gives lenders an independent estimate of the home’s value — and it protects borrowers from paying more than the home is worth. The appraiser will visit the property and compare it to similar homes that have recently sold in the area in order to come up with an estimate of value. The typical appraisal fee ranges from $300 to $500 (or more), although some lenders will cover this cost if your loan doesn’t close — so it’s worth asking about.
Credit report fee: As part of their underwriting process , lenders will order a credit report on each borrower from one or more credit reporting agencies . The credit report will detail your credit history — including any late payments , bankruptcies , or other negative information — which will help lenders determine whether or not you’re likely to repay your mortgage on time . The typical credit report fee is around $30 .

How Much are Closing Costs on a VA Loan?

Closing costs can be one of the most confusing aspects of getting a VA loan. Who actually pays these costs, the buyer or the seller? This guide will explain who pays closing costs on a VA loan and how much they typically amount to.

Buyer

As the homebuyer, you are not responsible for paying any real estate agent commissions. The seller pays both the listing and buyer’s agent out of the proceeds of the home sale. You are, however, responsible for certain other closing costs outlined in the Closing Disclosure, which is a three-page document that details all loan terms and final costs.

According to the Closing Disclosure, buyers can expect to pay:
-Loan origination fee: This is a fee charged by the lender for processing your loan application. It is usually a percentage of the loan amount and may be charged as a flat fee.
-Discount points: Discount points are a type of prepaid interest that allows you to buy down your interest rate. Each point costs 1 percent of your loan amount.
-Appraisal fee: An appraiser will visit your home to determine its value for loan purposes. The appraisal fee is generally around $500 but may be more or less depending on your location and type of home.
-Home inspection fee: A home inspector will visit your home to look for any major problems that need to be fixed before you can close on the loan. The inspection fee varies depending on the size and location of your home but is typically around $300 or less.
-Credit report fee: The lender will pull your credit report in order to determine your creditworthiness. This usually costs around $30 but may be more or less depending on the lender.
-VA funding fee: The VA funding fee is a one-time charge that helps cover the cost of the VA Loan program. It can be paid in cash at closing or rolled into your loan amount.

Seller

The seller may pay all of the buyer’s closing costs, or the buyer and seller may agree to share them. If you’re getting a VA loan with the help of a VA-approved lender, you can ask the seller to pay your closing costs, or negotiate to have them split between you and the seller.

Lender

The U.S. Department of Veterans Affairs (VA) doesn’t require any closing costs on VA home loans. Lenders, such as banks and mortgage companies, can charge VA borrowers for some of the loan’s costs. These costs include the lender’s origination fee, discount points and other third-party fees, such as appraisals and credit reports. The borrower can ask the seller to pay some or all of these costs, but the seller isn’t required to do so.

Who Pays for Escrow and Appraisal on a VA Loan?

VA loans are a benefits package available to eligible service members, veterans, and surviving spouses. One of the most notable benefits is the lack of a down payment requirement. But, there are still some costs that need to be paid by the borrower. So, who pays for escrow and appraisal on a VA loan?

Buyer

The buyer is responsible for paying for the escrow and appraisal on a VA Loan. The appraisal is required in order to determine the value of the property. The escrow is used to ensure that the seller receives the purchase price of the home and that the buyer receives the home free and clear of any liens or encumbrances.

Seller

The typical costs paid by the seller when closing on a VA loan are:
-Origination fee: This is the fee charged by the lender for processing the loan. It is generally a percentage of the loan amount, and can vary from one lender to another.
-Discount points: Discount points are paid upfront in exchange for a lower interest rate on the loan. One discount point equals one percent of the loan amount.
-Appraisal fee: An appraisal is required on all VA loans in order to determine the value of the property being purchased. The appraisal fee can vary depending on the type of property being appraised and its location.
-Home inspection fee: A home inspection is not required, but it is strongly recommended in order to identify any potential problems with the property prior to purchase. The inspection fee will vary depending on the size and location of the property being inspected.
– Attorney fees: An attorney is not required, but you may choose to hire one to help with the closing process. If you do, you will be responsible for paying their fees.
-Title insurance: Title insurance protects you from any legal claims that may arise from problems with the title to your home. The seller is usually responsible for paying for this insurance, but you may be asked to pay for it in some situations.
-Recording fees: Recording fees are charged by your local government in order to record the deed to your home in their records. The seller is usually responsible for paying these fees, but you may be asked to pay them in some situations.

Lender

The lender is responsible for paying for the appraisal, but the borrower is responsible for paying for the other closing costs, including escrow fees.