Determining VA Loan Closing Costs

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  • Budgeting for VA loan closing costs can prevent expensive surprises when you buy a home. Find out what to expect at mortgage settlement with this guide.

VA loan closing costs cover the fees associated with your VA-backed mortgage. You can get this home loan with no down payment as an eligible service member, veteran or spouse if you meet the VA lender's financial qualifications. 

What Do VA Loan Closing Costs Include?

The lender groups various types of expenses in your closing costs. Some of these fees include title insurance, credit report fees and loan origination fees. Closing costs include the appraisal fee for the property, which is usually several hundred dollars. You may also buy down points on your mortgage, which means you pay for a lower interest rate at settlement. 

The VA also charges a funding fee that helps pay for the cost of this benefit. You must pay 2.3% of the total loan amount at closing or 1.4% if you make a down payment of at least 10%. Some service members are exempt from the funding fee, including Purple Heart recipients and disabled veterans. 

How Do Closing Costs Differ for a VA Loan? 

VA rules prevent lenders from charging certain fees on this type of mortgage. These so-called non-allowable fees include the lender's attorney fees, settlement fees and penalties for paying off your mortgage early. The VA also limits the amount your lender can charge as an origination fee to no more than 1% of the total amount of the loan ($2,000 on a $200,000 mortgage, for example).

How Much Will I Pay for VA Loan Closing Costs?

While the answer varies depending on the lender, your VA loan closing costs will likely be about 5% of the total loan amount or $10,000 on a $200,000 mortgage.

How Do I Pay VA Loan Closing Costs?

With a VA loan, you can roll the funding fee into your monthly mortgage payments. For the rest of the closing costs, you must either bring cash to closing or receive assistance from the center or the lender to pay these expenses. 

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