The VA home loan is possibly the best loan. It is available to active military and veterans. Some features are:100% financing and no down is payment required. 30 year fixed interest rate, and interest rates with rates the lowest they have almost EVER been. VA loans are not credit score driven and have flexible underwriting guidelines to get active military and veterans qualified.
VA loans do NOT have monthly mortgage insurance, unlike FHA loans, or conventional loans with less than 20% down. There are closing costs involved with buying a house using a VA home loan even though VA loans offer 100% financing. Closing costs are in addition to the down payment and can
VA loans are not credit score driven and have flexible underwriting guidelines to get active military and veterans qualified
There are 3 major upfront costs required when buying a house with a VA loan; the earnest money deposit, home inspection fee and appraisal fee. When you make an offer to buy a home, it is customary to put up an earnest money deposit ranging from 1-3 % of the purchase price. This offer will show the seller you are serious. These deposit funds will be held with an escrow company after your offer is accepted. If you negotiate for the seller to pay all of your closing costs, you will get this money refunded when you close on the house.
The buyer will have to pay for a home inspection. Though optional for a VA buyer, it is highly recommended to have a home inspection. As an independent 3rd party the inspector will inspect all aspects of the house such as the structure, electrical, plumbing and more. It is so that you know you are making a sound investment. Home inspections generally run about $300. This has to be paid up front by the buyer.
The buyer will have to pay for a home inspection. Though optional for a VA buyer, it is highly recommended to have a home inspection. As an independent 3rd party the inspector will inspect all aspects of the house such as the structure, electrical, plumbing and more. It is so that you know you are making a sound investment. Home inspections generally run about $300. This has to be paid up front by the buyer.
Next, you will have to pay for a home inspection. It is optional for a VA buyer to have a home inspection, but highly recommended. The inspector will work for you as an independent 3rd party and inspect all aspects of the house, the structure, electrical, plumbing and more, so that you know you are making a sound investment. Home inspections generally run about $300. This has to be paid up front.
And lastly, you will have to pay of the VA appraisal. When you purchase a property the lender will require an appraisal on the property, this has to be ordered right away in the purchase of property. A VA appraisal current costs $400. So to recap, in the beginning stages of buying a house, you will have to come up with an earnest money deposit, $300 for a home inspection and $400 for an appraisal.
The rest of the costs are paid when you close on the house. The closing costs can be broken into 4 categories; lender fees, title/escrow fees, reserves and pre-paids taken by the lender. There are certain fees that the VA borrower is NOT allowed to pay. These will have to be paid by the seller. The major fees the VA borrower is NOT allowed to pay for are:
When you buy a house, the closing is handled by an escrow company. There fees are an escrow fee, notary public fee, and a few other fees for handling the closing. These fees will not have to be paid by the VA borrower, but they will have to be included in the credit that you ask for from the seller. These fees can amount to on average over $1,000. Additionally when you buy a house you will be required to obtain 2 title insurance policies, owners and lenders. The seller will typically pay for the owners policy and the buyer will pay for the lenders policy. The cost of title insurance depends on cost of the property. It will be around $400 for a $300,000 house.
Lender Related Fees The lender has fees involved with processing, underwriting and originating your loan. There is generally an underwriting fee, processing fee, credit check fee and possibly an origination fee. The VA borrower is not allowed to pay for the underwriting and processing fee, so as mentioned above, these fees will have to be paid for by the seller. The origination fee can vary depending on your interest rate. Generally if you want to lock in the lowest interest rate, a lender can charge up to 1% of the loan amount as an origination fee. Additionally, if you want to buy down the interest rate below market, you can pay discount points to get an even lower than market rate.
Pre-Paid Interest on the Loan. When you get a VA home loan, you will have to pay the interest on the loan from the day you close until the end of the month. So for example if you closed on your new home May 5th, you would owe interest on the loan from May 5th to May 31st. This is called pre-paid interest and is part of your closing costs. But then your first payment would not be until July 1st. So you essentially get to skip the June payment even though you move in the house May 5th. The reason for this is because mortgage payments are made in arrears or behind . You made your May payment as part of your closing costs, and you wont make your June payment until July 1st. It can be advantageous to time your closing at the end of the month, so you limit the pre-paid interest and reduce your overall closing costs.
The VA lender will require you to pay an entire 12 month homeowners insurance policy in advance. To insure against fire and other disasters, all lenders require that you keep a homeowners policy on a property. Paying 12 months in homeowners insurance up front can total between $400 to $1,000 or more. Please call your insurance agent for a quote. The cost will depend on where your property is located and the purchase price
A requirement from the VA lender is that you to pay an entire 12 months of homeowners insurance policy in advance. All lenders require that you keep a homeowners policy on a property if there is a mortgage on it. This will insure against fire and other disasters that could damage your house. Paying 12 months in homeowners insurance up front can total anywhere from $400 to $1,000 or more. Call your insurance agent for a quote as the cost will depend on where your property is located and the purchase price.
These are the major closing costs associated with buying a home with a VA loan. As mentioned, total closing costs can range from 2-4% of the property purchase price which can be a fairly large number.
It is very important to either plan to set aside for these costs or work with the real estate agent to represent you and negotiate with the seller to pay for your closing costs.
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