Tips & Special Topics
What Fees to Expect with VA Loans
Added November 5, 2010 | Updated October 3, 2011
Many VA-eligible borrowers wonder what fees will be charged with a VA home loan and how much cash is needed at closing.
VA borrowers can expect to be charged for the following at closing:
• VA funding fee
• Credit report fee
• Appraisal fee
• Compliance inspection fee*
• Lender’s origination fee*
• Reasonable discount points (if applicable)
• Pre-paid taxes
• Assessments and insurance
• Hazard insurance
• Flood zone determination
• Land survey
• Title examination and insurance
• Recording fee
• Recording Taxes
• Mailing and/or wire fees
• Other fees authorized by VA
(*VA-approved)
Most of these fees can be rolled into the VA mortgage as long as the total amount does not go over the conforming loan limit for the county in which the VA loan is made. The seller is allowed to pay buyer’s closing costs. But, the VA limits those costs paid by the seller to 4 percent of the purchase price plus allowable closings costs up to a maximum of 5%.
The VA funding fee is required and must be collected by the VA-approved lender for most VA home loans. The VA funding fee varies from .5 percent to 2.8 percent depending on the VA borrower’s circumstances and the type of VA loan being processed. Certain disabled veterans and surviving spouses are exempt from the VA funding fee.
Unlike the VA funding fee, which is unique to VA home loans, the other fees expected to be paid by VA borrowers are typical of most mortgage programs. Fees like the credit report fee, appraisal fee, and compliance inspection are all similar costs found at closing of conventional and comparable loans.
It is also very common for VA lenders to charge origination fees of up to one percent. Also, one or two rate reduction points may be charged. There may be limits on origination and point reduction fees for VA home loans by state. The total amount of origination and rate reduction fees combined with other fees cannot exceed the state limit. Therefore, it is possible to see no origination or point reduction fees at a VA mortgage closing.
Additionally, at closing there are certain fees that are put into escrow to cover the coming year’s expenses. Elements like property taxes and insurance would fall into this category. These items are almost always included in the monthly mortgage payment.
Frequently, hazard and flood insurance will appear in the total monthly mortgage payment. Flood insurance is mandatory if the property being financed is deemed to be in a flood zone.
Sometimes a land survey is necessary if the property lines are not clearly defined in a real estate sale. Therefore, the survey charges would appear in the closing costs of a VA loan.
Finally, there are several fees associated with the title company. Title examination and insurance, recording fee and mailing/wire fees are common in most closings, including VA mortgages. Title insurance protects the lender’s interest in the property in case the ownership is contested. The title company is responsible for recording the name change on a real estate title with the county. And, most often a mail or wire fee is associated with the final payout of the loan. Closing fees are associated with all of these services provided by the title company.
What sets VA home loans apart from other types of mortgages is that the VA sets limits on the type of fees allowed and in some instances how much can be charged. For more information about VA loans and the fees associated with them, contact a VA home loan professional.
