If you’re an active-duty service member or veteran, a VA loan could help you finance a home with no down payment and a lower credit score.
This kind of loan comes with closing costs like other mortgages, which can either be paid upfront or as part of the loan itself. Here is what you can expect to pay for a VA loan.
What are VA loan closing costs?
VA loan closing costs are all the fees associated with originating a VA loan. These can include:
- Application and/or origination fee
- Credit check fee
- Appraisal fee
- Title search and title insurance costs
- Hazard insurance
- Real estate taxes
- Recording fee
VA loans also come with a funding fee, which is what helps allow you to get the loan without a down payment.
How much are VA closing costs?
VA closing costs can range from 3 percent to 5 percent of your loan, but the final tally ultimately depends on the lender you choose to work with.
The exception is the funding fee, which ranges from 1.4 percent to 3.6 percent and can be based on the type of VA loan (for example, purchase or refinance), size of your down payment (if you’re making one), or whether or not you’ve obtained a VA loan prior.
You can finance the funding fee with your loan or pay it upfront at closing.
By law, your VA lender is required to give you an estimate of the closing costs of your loan within three days of applying for it, and also a finalized list of the closing costs three days before your closing date.
Can sellers pay VA loan closing costs?
The home seller can agree to pay a portion of the buyer’s closing costs, up to 4 percent of the loan. This could cover the funding fee or origination fee, for instance.
Note that for a VA loan, sellers are always required to pay for the real estate agent commission, any brokerage fees, and a termite report.
How to limit out-of-pocket costs
Besides negotiating with the seller to pay for some of the closing costs, you can cut your expenses by skipping discount points, which reduce your interest rate but cost money upfront.
In addition, there are some special circumstances in which a borrower can be exempt from the funding fee. These include if the borrower is:
- Living with a disability connected to their service and being compensated for the disability
- Living with a disability connected to their service and receiving military retirement pay (instead of compensation)
- An active-duty Purple Heart recipient
- A surviving spouse whose partner died in service (and is being compensated) or from a service-related disability
- Eligible to be compensated due to a pre-discharge
You can also try to snag more savings by asking your mortgage lender if it has any discounts or rebates — some might even waive certain costs if you ask.
If possible, try to close your mortgage towards the end of the month, as well. This reduces the amount of per-diem interest you’ll have to pay.