The veteran can pay a maximum of all reasonable and customary amounts for any and all of the “Itemized Fees and Charges” designated by VA as defined below plus a 1% flat charge by the lender plus reasonable discount points. Some special provisions apply to construction, alteration, improvement and repair loans.
HOW TO HAVE MINIMAL TO NO CLOSING COSTS
Some veterans or their family members think that there are no closing costs associated with a VA mortgage loan.There are costs for any loan, it’s a matter of who pay’s for the closing costs and how the transaction is structured.
The loan amount is always equal to or less than the purchase price or appraised value of the property, whichever is less (plus the VA Funding Fee).
If you want closing costs to be paid for in the transaction of the VA loan, the purchase price must be increased by the seller. The seller then has to contribute closing costs to the buyer (veteran). To do this, the home must appraise for the increased price.
The normal range of closing costs can range from 2 to 5%. To get more specific, we must know a few details about your transaction and we can provide a list of itemized fees and a Good Faith Estimate.
FEES & CHARGES
The Veterans Administration has allowable fees and charges that a veteran borrower is allowed to pay for at closing with a VA mortgage loan. These costs are determined as reasonable and customary fees by each local VA office.
All other costs in the transaction are considered non-allowable and can be paid for by the seller with a purchase transaction or with a refinance transaction of a VA mortgage.
Below are the Fees and charges allowed:
APPRAISAL & COMPLIANCE INSPECTIONS
The veteran can pay the fee of a VA Appraiser and VA compliance inspectors. The veteran can also pay for a second appraisal if they are requesting a reconsideration of value. The veteran cannot pay for a second appraisal if the lender or seller is requesting a reconsideration of value or if parties other than the veteran or lender request the appraisal.
The veteran can pay for the recording fee(s) that the title company &/or county recorders office charges.
The veteran can pay for the credit report that is pulled (obtained) by the mortgage lender (bank / brokerage, etc.).
The veteran can pay the escrow (property taxes, home owners insurance, pro-rated interest for the month the loan closes).
The veteran can pay for the hazard insurance (also known as “Home Owners Inusrance”) premium. Flood insurance can also be paid for by the veteran if the property is located in a flood zone (flood plane).
FLOOD ZONE DETERMINATION
The veteran can pay the actual charge to determine if the property located in a flood zone (flood plane).
The veteran can pay a charge for a survey to be done if the lender requires a survey to be done.
Title Work & Title Insurance
The veteran may pay a fee for the title work which can include and not be limited to:
Title search, title insurance (lenders policy, owners policy), tile examination, closing fee, courier fee, document preparation fee and other miscellaneous title fees, endorsements, environmental protection lien endorsement to a title policy is needed, any and all of these title fees may be charged to the veteran.
When using a notary outside of the title company, a mobile notary or a 3rd party notary fee may be charged.
SPECIAL MAILING FEES
For refinancing transactions, the veteran can pay charges for over night delivery.
VA FUNDING FEE
Only disabled veterans are exempt from the VA Funding Fee (which requires a minimum of 10% disability from the service), each veteran must pay a funding fee to VA. See the VA Funding Fee percentages for the percentage pending on the type of loan you are seeking.
OTHER FEES AUTHORIZED BY THE VA
There can be additional fees for local areas if authorized by the VA. Fees must be normal and customary to be approved by the VA.
The following list provides examples of items that CANNOT be charged to the veteran as “itemized fees and charges.” Instead, the lender must cover any cost of these items out of its flat 1% fee.
Loan closing &/or settlement fees. Document preparation fees by the lender &/or title company &/or attorney, preparing loan papers or conveyance fees, attorneys services other than for title work, photographs, interest rate lock – in fees, postage and other mailing charges, stationery, telephone calls and other overhead, amortization schedules, pass books, and membership or entrance fees, escrow fees or charges, notary fees, preparation and assignment of mortgage to other secondary market purchasers, trustee’s fees or charges, loan application or processing fees, fees for preparation of truth-in-lending disclosure statement, fees charges by loan brokers, finders or other third parties, and tax service fees.
When reviewing allowable borrower fees and charges, many of the items can be paid for by the seller of the home and can be negotiable when presenting an offer on a home to the seller. Please consult with your Real Estate Professional handling the transaction.