Are you in the market for buying a home and have served or currently serve in the military? If so, you may be eligible to use a VA loan to purchase your new home.
This type of loan provides benefits that other loans do not, such as no down payment requirements and more lenient loan prerequisites.
While this type of loan can provide several advantages, one question buyers often ask is, “Can closing costs be included in a VA home loan?”
We’re here to tell you everything about closing costs and how they can be covered under your VA loan.
What are closing costs and why are they important to a VA home loan?
Closing costs can seem intimidating and confusing when taking out any type of home loan, but they’re an important part of the home-buying process.
Depending on the lender and state you’re in, closing costs can include:
- Appraisal fees
- Title insurance fees
- Application fees
- Realtor and lawyer fees
- VA funding fees
- And more
It’s important to understand what all of these charges mean so that you make an educated decision about your loan. Doing research ahead of time can help you know what kind of closing costs to anticipate.
Understanding the type and amount of fees you may be required to pay early in the home-buying process can save you from feeling overwhelmed when it comes time to close on your loan.
How to cover closing costs when buying a home?
Buying a home is one of the most exciting investments you can make. But it can also be daunting due to the costs associated.
One major expense to plan for is closing costs. Fortunately, there are a few strategies you can use to cover them.
Obtaining a VA loan means you may be eligible to purchase a home without a downpayment. Additionally, private mortgage insurance (PMI) isn’t required for the loan.
Closing costs such as the VA funding fee can be rolled over into the loan. However, other closing costs can not be.
Sellers and buyers alike will pay closing costs on a home. Some of the buyer’s closing costs can also be negotiated to be paid by the seller.
These advantages can lower the barrier and reduce the costs of obtaining a home for those who qualify.
Ultimately, working with an experienced lender will provide you with a clear breakdown of closing costs due on the day of closing.
Ways to negotiate with sellers to reduce the cost of closing fees
Negotiating can be intimidating, especially when it comes to big expenses like closing fees. To maximize your savings, take the time to understand the different costs associated with closing fees and how they can vary.
If possible, work directly with the seller as that may offer more room for negotiation than working directly with a bank or other third party. An experienced real estate agent can also help with negotiating.
Knowing the value that you’re able to bring to the table such as a cash offer or an accelerated closing timeline of 30 days or less can help bolster your position on settling on favorable terms.
Tips for budgeting for closing costs on a VA loan
Closing costs are a part of the home buying process no matter if you go with a VA loan or another loan option, but there are ways to manage them easier.
First, it’s important to ask your lender for an estimate of all closing costs due and a breakdown of what each cost entails. This can help you see exactly which charges are necessary and which ones could potentially be reduced or waived.
Additionally, consider shopping around for lower interest rates as this could reduce your overall costs and simplify the budgeting process.
Lastly, determine ahead of time how much you can feasibly spend on fees, and don’t be afraid to negotiate with your lender over these charges. A great credit score and a low debt-to-income ratio improve your chances of favorable loan terms.
Being armed with the right information and a solid budget plan will make budgeting for closing costs much easier when taking out your VA loan.
Questions to ask your lender about rolling closing costs into your VA home loan
One of the best steps you can take during this time is to directly speak with your lender in order to make sure that you understand all the different ways that closing costs can be rolled into your loan.
- What expenses are covered?
- Is there any type of assistance in covering the cost?
- Is it better to pay costs upfront?
- How does paying off the loan immediately affect interest and terms down the line?
By asking important questions upfront, you’ll be better positioned and informed when it comes time to decide on a loan that’s right for you.
The Federal Savings Bank: Focused on mortgages, dedicated to your dreams
Taking out a VA home loan can be daunting, but with the right information, and the right lender—it doesn’t have to be.
Knowing what closing costs are and how to budget for them is key to finding a great home and making sure you’re fully prepared when signing the paperwork.
Don’t be afraid to ask your lender questions about how to include closing costs in your loan and negotiate with the seller if you need to reduce the cost of some fees.
The ultimate goal should be to understand the total cost of a loan before committing so that you can financially secure your future without worry or stress. Learn more about the VA loan process with The Federal Savings Bank.
Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to you individual situation.
