VA home loans, like other mortgage programs, include a closing cost. The difference is that you are not obliged to bear all of the VA loan closing costs. You can always request your VA lender to pay for some or all of the closing costs, including the allowable fees such as origination and the appraisal fee. In fact, the VA does not set any limit on the amount of closing costs an applicant can negotiate with their VA lender for settlement. To provide some more information on the topic, here’s a list of the common VA loan-related closing costs you need to know. Origination Fee The origination fee is the fee that a lender charges when you enter into a loan agreement. It’s required to process and underwrite the VA home loan. VA lenders can choose to charge you a flat 1 percent origination fee that’s 1 percent of your total loan amount. Alternately, they can charge a host of other fees until the amount doesn’t exceed the 1 percent of your home loan. Appraisal Fee The VA appraisal fee is another allowable fee for VA home loan buyers in Texas, Florida, or any state. The VA decides the fees that typically comes around $425. You can check the maximum allowable appraisal fee for your state by visiting the website of The Department of Veteran Affairs. Discount Points Discount point(s) is an interest amount that you pay in advance to the lender. It’s a kind of provision to help you lower your loan’s rate of interest. One discount point means 1 percent of your total loan amount. This means, if your total loan amount is $3,00,000, then 1 discount point would be $3,000. The more points you pay to the lender, the lower will be your interest rate. Pest and Septic Inspection Fees The pest and septic inspection fees are applicable in all but nine states. The VA lender or seller pays the fees in most cases. Buyers, however, may have to bear any repair costs related to septic or pest issues. Title Insurance Fee Title insurance is there to protect from any financial loss if there comes a titling issue such as a boundary dispute or a lien, after the closing of the property. Although VA home loan borrowers aren't required to buy the title insurance, most owners go for it, for peace of mind. There are two title insurance - one for the lender, and the other for the owner. In many states including Illinois, the lender typically pays one-time premium for your title insurance. Credit Report Fee In addition to the above loan-related closing costs, some VA lenders may also charge a fee to access your credit information. According to the VA, this fee should not be more than $50. Conclusion Closing costs also includes non-loan fees such as recording, survey fee, home warranty fee, and home owners association or HOA fee. Learning about them on your own may not be easy for everyone. That’s why it is advisable to consult a loan banking officer, who can help you understand the prerequisites to obtain a VA home loan. A loan officer can also help negotiate the closing costs with your VA lender.
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AuthorDarrick encourages readers to post issues that need immediate attention in terms of home buying; such interactions will enhance reader engagement and provide a road-map for others Archives
November 2017
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