As a veteran, you can get 100% financing with a VA loan. Just because you don’t need a down payment, though, you still have to pay the closing costs. Luckily, the VA greatly limits the fees veterans can pay on a loan, making it a less expensive option than conventional loans in most cases.
The Allowed Fees
Veterans are allowed to pay any of the following fees:
- Origination fee – Veterans are allowed to pay a 1% origination fee. This means 1% of the loan amount. On a $200,000 loan, you can pay a $2,000 upfront fee. The lender cannot also charge you for individual fees, such as underwriting or processing though. If they charge the origination fee, that’s the only lender fee they can charge.
- Appraisal fee – The appraisal fee is a third party fee that veterans can pay. The appraiser tells the lender the true value of the home and if the home is in good condition. The home must meet the Minimum Property Standards in order to qualify for VA financing.
- Title fees – Veterans can pay the cost of the title search and title insurance. The title search lets the lender know the home is able to be transferred and that there aren’t any existing liens on the property. The title insurance protects the lender should someone come forth down the road and try to claim ownership. Veterans must pay for the lender title insurance, but they may also purchase an owner policy to cover themselves (this is optional).
- Credit report fees – The credit reporting agency will charge the lender a fee for their service. The lender can charge this fee to you. It’s usually nominal – between $25 and $35 depending on the lender.
- Recording fee – The county will charge you a fee to record the new deed as part of public record. This fee/service is required.
- Flood Certification – The lender will need to know if your home is in a flood zone according to FEMA. If it is, you will need to purchase flood insurance in order to close on the loan.
- Survey – You aren’t required to a get a survey, but it’s often recommended so that you are aware of any encroachments or easements on your property.
- Insurance – Every veteran must purchase homeowner’s insurance in order to close on a VA loan. If you are in a flood zone, as discussed above, you’ll also need flood insurance.
- Taxes – If you must fund an escrow account or pay county taxes up front, the VA allows you to do so at the closing. The amount you will pay depends on the county, when the taxes are due, and the time of year.
Fees Veterans Can’t Pay
There is also a list of fees the veteran cannot pay on a VA loan. They include:
- Closing fee – The title or escrow company often charges a fee to close a mortgage loan and fund the money to the appropriate parties. The VA doesn’t permit veterans to pay this fee though.
- Doc prep fees – Some lenders charge fees to prepare the documentation for the closing. Again, the VA doesn’t allow this fee to be paid by the veteran.
- Underwriting or processing fee – Veterans cannot pay a fee to underwrite or process your loan as an itemized fee, but they can pay it if the lender lumps everything into an origination fee as discussed above.
- Application fee – Again, this fee should be a part of the 1% origination fee as lenders cannot itemize a fee to process your application.
- Courier fees – Any fees charged to messenger documents or mail them to the appropriate party cannot be charged to the veteran.
- Rate lock fees – Some lenders charge a fee for borrowers to lock in an interest rate, but the VA doesn’t allow this fee.
- Notary fees – Any fees charged by the title company or closing agent for notary services cannot be charged to the veteran.
Any of the above fees might be charged, but the veteran cannot pay them. It’s up to the seller, lender, or real estate agent to cover the costs for the veteran.
The fees to close on a VA loan are much less than most other loan programs. Veterans can take advantage of this benefit and lower the amount of money they must bring to the closing.