Demystifying Costs Associated With Your VA Loan
Aside from the rate that you will pay for your VA loan, there are a few costs that are important to understand before deciding to go forward. The fees and costs are regulated by the VA and some can be waived such as the funding fee.
Below are some costs that you will likely encounter when getting a VA loan:
The VA loan doesn't require Private Mortgage Insurance (PMI) which is normally required for mortgages that do have a down payment of at least 20% of the purchase price. However, the VA does have what is called a funding fee which is required by law and used by the VA to off-set the tax payers cost of offering the benefit. It is important to note that if you have a disability rating from the VA and receive compensation that you can have the fee waived. Also, a great benefit of the VA loan is that you can "roll in" the funding fee into your loan. Below is the funding fee percentages based on usage:
Purchase And Construction Loans
|Type of Veteran||Down Payment||First Time Use||Subsequent Use for loans from 1/1/04 to 9/30/2011|
|| 3.3% *
|| 3.3% *
Note: The funding fee for regular military first time use from 1/1/04 to 9/30/04 is 2.2 percent. This figure drops to 2.15 percent on 10/1/04.
Cash-Out Refinancing Loans
|Type of Veteran||Percentage for First Time Use||Percentage for Subsequent Use|
|Regular Military||2.15%||3.3% *|
|Reserves/National Guard||2.4%||3.3% *|
* The higher subsequent use fee does not apply to these types of loans if the veteran's only prior use of entitlement was for a manufactured home loan.
Other Types Of Loans
|Type of Loan||Percentage for Either Type of Veteran Whether First Time or Subsequent Use|
|Interest Rate Reduction Refinancing Loans||.50%|
|Manufactured Home Loans||1.00%|
There are a number of itemized fees that go into closing costs associated with your VA loan. VA loan closing costs are regulated by the VA with maximums established for each cost. Below is a list of common closing costs associated with your VA loan:
The VA requires an approved appraiser to appraise the home to ensure that the home is in "move in" condition and free from any defects. This helps the home owner in making sure that the home you buy doesn't have any major defects or if it does, that you are aware of them.
Recording Fees: When you purchase a home there are a number of recordings that have to be done to state and other agencies or organizations.
Credit Report: To pull your credit history.
Hazard Insurance: This is also known as Homeowners Insurance that protects you from a number of potential liabilities in being a homeowner.
Survey: Your house or land will need to be surveyed to ensure that the plot or area is properly listed and supported with records.
Title Examination: To ensure that there are no other claims against the title of the property or potential problems.
Courier Services: There are a lot of documents that go back and forth and this is associated with the Federal Express or other costs of sending information.