Tips & Special Topics
What Are The Costs Of Securing A VA Loan?
For those who know that they want to purchase a home, and are considering a VA Loan, it is helpful to consider the costs that are involved. In any home purchase, there are cost requirements to take into consideration. You'll want to have a solid understanding of what these costs are before you agree to a VA home loan or any other type of loan. Here are some of the various costs associated with a loan guaranteed by the Veteran's Administration.
Interest Rates
One of the costs of a mortgage is the interest rate. The rates that can be obtained for VA loans fluctuate with the market, much like that of other loan types. You may pay a bit less than a conventional loan, and perhaps about the same as an FHA loan, which is another federally backed loan. Interest rates rise and fall like those for other loans. Interest rate factors into the overall cost to you.
Down Payment
One of the benefits of a VA loan is the possibility of obtaining a VA-guaranteed loan without a down payment. This means that the entire cost of the home is financed for you over a set amount of time. With that said, realize that there is a fee required by the VA (though it can be rolled into your loan as well) that ranges from 1.25 to 3.3 percent of the home's sale price or the financed amount. This fee should be paid up front, if at all possible because paying just two percent now is much less expensive than rolling it into the loan (borrowing that money) and paying it off over time together with interest.
Closing Costs
VA loans, like all mortgage loans, do cost you something in closing costs. There are title insurance premiums, fees for closing services, and other charges that may apply. Many first time homebuyers will roll some of these expenses into their home loan, when eligible. The home's appraisal fee, though, is an expense that is not often rolled into the loan. An appraisal amounts to $200 to $400 or more dollars depending on where you live. Closing costs and origination fees are regulated by the Federal government on a VA loan.
The best way to know what the cost of a VA loan will be is to have a quote written up for you. You should consider other lending options including the FHA loan and the conventional home loan as well. Many times, the VA loan is going to offer the least amount of out-of-pocket cost to you.
