VA Loan Costs and Fees

Understanding VA Loan Costs and Fees

Like all home loans, VA loans include a variety of costs and fees including closing costs like an appraisal fee and processing fee and the VA funding fee, which is unique to VA loans. There are certain closing costs that are prohibited by the VA like prepayment penalties. Read on for more details about the costs and fees associated with VA home loans.

VA loan closing costs

Closing costs are a part of most loans and include a variety of charges that pay for things like processing, servicing, and documentation. They can be anywhere from 1%-6% of the total loan amount. VA loan closing costs can include:

• VA appraisal fee
• Insurance and taxes
• Title insurance
• A loan origination fee
• Commission fees
• Any buydowns that you choose to do and other various costs
• Credit check fee

The VA does allow options like seller and builder credits and seller concessions that can help with closing costs, however it does not allow closing costs to be rolled into the total loan. They must be paid when the loan closes.

While the VA limits the amount of closing costs that can be charged to the borrower, some costs can still be significant. Borrowers should carefully review the closing costs associated with their VA loan to ensure they understand all the fees involved.

VA loan funding fee

The VA loan funding fee is a cost that is unique to VA loans and is charged by the VA to help offset the costs of the VA home loan program. This fee is a percentage of the total loan amount and varies based on the loan type. It may also vary by how many times you’ve used VA loan products, and your down payment, depending on the loan type.  

For example, if you are using a VA-backed purchase loan (the main type used to buy a home), it is your first use, and your down payment is less than 5%, then your VA funding fee will be 2.15% of whatever the total loan amount is. After your first use, at less than 5% down payment, it will be 3.3%.

The funding fee can be paid upfront or financed into the loan. Borrowers should be aware that the funding fee can be a significant expense, and they should factor it into their overall costs.

VA loan origination fee

A VA loan origination fee is a fee that lenders charge to cover the costs of processing a loan. The fee covers services like underwriting and other administrative tasks. The VA limits the total amount of your lender’s origination fee to no more than 1% of the total loan amount.

VA loan costs to seller

VA loan costs to seller are costs that the seller is required to pay for a VA loan. VA Loan Costs to Seller are costs that the seller may be required to pay as part of the VA loan process. These expenses include agent commissions, brokerage fees, and certain reports on the property. Like other loans, closing costs can be negotiated between buyers and sellers.

With careful planning and responsible financial management, veterans and their families can take advantage of the benefits offered by the VA loan program and achieve their homeownership goals.