va closing costs

How Large are VA Closing Costs?

Many people know that the largest part of buying a home – the down payment – isn’t required with VA loans. But this doesn’t mean that VA buyers can close on a home without paying anything – they still have to pay closing costs. So how large are VA closing costs? The typical closing costs for a VA loan is around 3 percent of the home value. Here are the closing costs that VA home buyers should be aware of.

How Large are VA Closing Costs?

VA Funding Fee

The VA funding fee is a percentage added to the mortgage that helps the VA’s guarantee. The total cost of the funding fee depends on the buyer. First time VA home buyers tend to get the lowest percentages – as low as 1.25% of the cost of the total loan. Once veterans apply for their second of third VA loan, they can get a rate as high as 3.3% of the loan. The size of the fee depends on the veteran and how much they put toward the down payment.

Discount Points

Discount points are a percentage added to your total VA closing costs and are available for any type of mortgage – not just a VA loan. This allows home buyers to lower their mortgage rate by paying a large fee upfront at closing. The goal is to save money in the long run by reducing monthly costs. Discount points are completely optional for any type of loan, and most VA home buyers choose to disregard.

Lender Fees

Lenders fees vary on the lender. The total costs of these fees depends on the home you’re purchasing and the size of the mortgage. The appraisal, recording fee, and title fees are some of the fees included in the lender fees.

Homeowner’s Insurance

Homeowner’s insurance is mandatory for home buyers no matter what type of loan you decide to go with, and you’ll have to pay some of it upfront. Your total homeowner’s insurance amount at closing depends on if you are in an area that requires a special type of insurance. For example, if you move to a flood prone area, you’ll have to consider getting flood insurance as well. A rule of thumb is that home buyers should expect to pay around $300-$500 upfront on insurance.

Can the Seller Pay a Portion?

The good news is that the with a VA home loan, the seller is allowed to pay some or all of the closing costs. Talk with your lender to see how much to expect to pay for your closing costs.

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