A Close Look at VA Loan Closing Costs

When it comes to home loan closing costs, many people hate the fee. Most first-time home buyers, be it in Texas or any other location, find it difficult to calculate the closing costs, as the fee includes several components such as insurance, and property taxes, among others. When you are securing a VA loan, however, you can ask the lenders to pay for most of your closing costs. Let’s have a closer look at all the closing costs VA lenders can charge you and what you can negotiate with them.

One Percent Origination Fee Rule

VA lenders charge closing costs from their borrowers in two ways. The first is using the one percent origination fee method wherein the loan provider charges one percent fee on your total loan amount. Given this, if your loan amount is of $2,00,000, then your closing cost would be $2,000. Additionally, the lender may charge you for items such as appraisal fees, insurance escrow, discount points, and other fees the VA thinks are legitimate.

Item-by-Item Fee

Even if the lender skips the one percent rule and evaluates closing costs item-by-item, they need to ensure that the fee does not exceed one percent of the total loan amount. Here’s the list of items that are usually part of the VA closing costs.

● Escrow items - property taxes, private mortgage insurance, homeowners insurance, etc.

● Processing or underwriting fees

● Escrow account fees

● Attorney fees

● VA Funding Fee (charged by the VA, which the veterans can include in their loan amount or ask the seller to cover)

● Fee for accessing your credit report

● Pest and termite inspection fee

● Title examination and insurance fee

● VA Appraisal fees (mandatory)

Note:

1. The above closing costs include both the PFC or Prepaid Finance Charges (directly related to the loan) as well as POC or Paid Outside Closing costs that affect your APR or Annual Percentage Rate.

Closing Costs You are Not Required to Pay

There are VA loan closing costs that you never have to pay as an applicant. These include:

● Pest infection fee ( in all but nine states)

● Loan prepayment penalties

● Mortgage broker fee or realtor commission

● Lender document fees

● Notary fees

Conclusion

VA loan borrowers can negotiate with their lenders to cover for all of the closing costs. That, however, depends on numerous factors including the type of property, the market, and the involved loan parties. Speaking to an experienced loan banking officer can help you learn more about all of these details and obtain a fairly accurate estimate of the closing cost during pre-qualification. Additionally, a loan officer can help you negotiate closing costs with your lender, besides preaching about other programs for first time home buyers, no matter you live in Texas or any other area.