Like conventional mortgages, a home loan from the U.S. Department of Veterans Affairs comes with closing costs and fees. For this type of loan, the closing costs typically range from 3% to 5% of the total loan amount. The fees are determined based on the lender, the location, the total loan amount and other factors.
One thing that sets a VA loan apart from other mortgage options is that the VA limits what the buyer can pay in closing costs. Below we break down the closing costs for these loans.
VA loan closing costs and fees
There are several costs and fees a VA loan borrower has to pay before or at the time of closing. Here are some of the fees you can expect to pay during your homebuying process:
- Origination charge: A lender charges origination fees to build a loan. This money goes toward the loan’s origination, processing and underwriting. Lenders can charge up to 1% of the total loan amount in origination charges. This varies from lender to lender, but pricing is typically competitive, usually around 1%.
- Appraisal fee: Appraisals are required for VA loans, and the VA establishes the price of this fee. The average rate for a VA appraisal is around $500; the buyer pays this upfront. You can see appraisal fee amounts by state on the VA website.
- Title charges: A title company's primary role in a home transaction is to make sure the seller can legally sell the property to the buyer. Title companies also ensure the buyer gets the title after the transaction is completed. Although lenders usually list title insurance in loan estimates and closing documents, this is a service you can shop for if you want to choose who does your title work. Title insurance covers both the lender and borrower — it helps the lender if the home is lost to a title claim and protects the borrower by proving ownership.
- Discount points: Discount points let you pay more upfront to get a lower interest rate over the life of the loan — the lower you go in interest rates, the higher the upfront cost, and vice versa. One point is equal to 1% of the total loan amount. If a buyer intends to live in the home for a long period of time, it might be in their best interest to buy these points.
- Credit report: Lenders typically charge $30 to $50 to run your credit report. This fee usually isn't paid until the buyer decides to proceed with a loan application — it can be paid at the closing table or rolled into the loan.
- Inspection fees: Even if the home is new, the VA requires an inspection. The price for a home inspection varies, but it’s $300 to $500 on average. Some areas inspectors examine are the foundation, plumbing, heating and air systems, roof, attic, insulation, walls, ceilings, floors and appliances. Buyers may be required to have well, septic and termite inspections completed; in most states, however, the seller is required to pay the termite inspection fee.
Additional VA loan expenses
You should also be prepared to pay several fees that may not be directly related to obtaining a VA home loan. Here are some other expenses to budget for:
- Property taxes: Property taxes are determined by the assessed value of your home and the tax rate set by your county. Lenders may have the homeowner put these monthly payments (PITI) in an escrow account. The lender will typically have you set aside six months of taxes and insurance to set up this account. Some lenders require you to establish this account, while others don't. The national average for annual property taxes is $2,471 in 2021.
- Homeowners insurance: This is a policy that protects the borrower if they lose their home or personal belongings in a disaster like a fire or a robbery. Lenders require this insurance for VA loans.
- Recording fees: Government agencies charge this fee for legally recording the deed and mortgage in connection to a home loan. This fee is typically paid by the buyer or seller, depending on the agreement. You might plan to budget $125 for these fees.
- HOA fees: Loans for a home that’s part of a homeowners association require a monthly fee. Annual dues are common, so they may be included in closing costs. These fees vary, but a monthly fee of $200 is typical.
- Real estate commissions: If the seller uses a real estate agent, they typically receive between 4% to 6% of the sale price of the home in commission. Although this money comes out of the seller's pocket, the seller typically factors the fee into the sales price of the home.
What to know about VA loan estimates
A loan estimate is a three-page document that breaks down the details of a mortgage. Buyers should request these estimates while shopping for a mortgage so they can effectively compare offers. Here’s what to look for in a loan estimate:
VA closing costs are typically 3% to 5% of the total loan amount.
- At the beginning of the document, borrowers can expect to see the date the estimate was issued, the buyer and prospective property addresses, the loan terms and rate details (e.g., whether or not the rate is locked). Don't worry if this box is unchecked while you're shopping around — most lenders aren't going to lock in a rate if you haven't committed to the loan.
- Below, you’ll see the terms: the total mortgage amount, the interest rate and the monthly principal and interest payment. You’ll want to verify if there’s a prepayment penalty or balloon feature on the loan. The prepayment penalty is a charge from the lender if your mortgage is paid off before a certain period by refinancing, selling or simply paying the entirety of the mortgage before the term has expired.
- The next section, "Projected Payments," breaks down your monthly principal, interest, taxes and insurance (PITI) payment. When comparing quotes, you’ll want to check the differences in principal and interest (taxes and insurance aren't set by the lender). This section will also tell you if taxes and insurance will be escrowed.
- Closing cost information appears at the bottom of the first page. These numbers may cause sticker shock, but the second page further breaks down these fees for clarity.
- On the second page, the left side lists actual costs from the lender, and the right side breaks down costs from your taxes and insurance not set by the lender. Review the left side of the second page for origination charges (points, application fee, underwriting fee); “Services You Cannot Shop For” (appraisal fee, credit report fee, flood determination fee, flood monitoring fee, tax monitoring fee, tax status research fee); and “Services You Can Shop For” (title work, survey fee, pest inspection fee). Total costs appear at the bottom of the page.
- The name of the lender and mortgage loan originator should appear at the top of the third and final page of the estimate. The last page compares the lender’s interest rates and those from other lenders. It also shows the mortgage’s APR and Total Interest Percentage (TIP).
- The last section includes "Other Considerations.” Here you can verify if your loan will be assumed, if homeowners insurance is required, details of the late payment policy and whether the lender intends to service the loan or sell it off after closing.
VA closing costs FAQ
- Who pays closing costs on a VA loan?
- Typically, the buyer pays the closing costs on a VA loan, but there are ways to lower these costs or avoid paying them completely by receiving lender credits or seller concessions. The VA allows a seller to pay up to 4% of the appraised value of the home in seller concessions, so it may be worth it for buyers to negotiate.
- Can you roll closing costs into a VA loan?
- Unlike funding fees, a borrower cannot roll closing costs into a VA loan.
- How does a VA loan affect the seller?
- The short answer is that a VA loan doesn’t usually affect a seller. VA loans generally have stricter requirements when it comes to appraisals. They also generally have longer waiting times to get to the closing table. However, with the lenient qualification guidelines, a VA loan may be the only way for a buyer to purchase a home.
- Do disabled veterans have to pay closing costs?
- Yes, though disabled veterans are exempt from the VA funding fee.
- What are typical closing costs for a VA loan?
- Closing costs on a VA loan are typically between 3% and 5% of the total loan amount.
- How much can a seller contribute on a VA loan?
- A seller can contribute up to 4% of the loan amount on a VA loan.
- Article sources
- ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. To learn more about the content on our site, visit our FAQ page.
- U.S. Department of Veterans Affairs, “Borrower Fees and Charges and the VA Funding Fee.” Accessed April 20, 2021.
- U.S. Department of Veterans Affairs, “VA funding fee and loan closing costs.” Accessed April 20, 2021.
- U.S. Department of Veterans Affairs, “VA Appraisal Fee Schedules and Timeliness Requirements.” Accessed April 20, 2021.
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