Buying a home is an exciting experience, but the process can also be overwhelming and leave you with lots of unanswered questions. One matter that often invokes confusion for VA borrowers is the subject of closing costs. Below, we’ve shared some information on what to expect for VA loan closing costs and how to budget appropriately.
What to Expect for VA Loan Closing Costs
If you’re a veteran or military borrower, you’ll be happy to know that the VA sets limits on closing costs. This helps keep home buying affordable for veterans, which is the main purpose of the VA loan program. That being said, there are still fees to be paid and borrowers need to understand their financial obligations.
How Much Will I Have to Pay?
VA loan closing costs can vary greatly, depending on several factors, including the type of property, location, and the lender’s fees. On average, veterans can expect to pay anywhere from 3% to 6% of the loan amount.
Can Closing Costs Be Rolled into a VA Loan?
Yes. The VA allows borrowers to roll the cost of their funding fee into their loan. The rest of your closing costs will most likely need to be paid outright.
How to Budget for VA Closing Costs
The best way to budget for VA loan closing costs is to do your research and compare costs between different lenders. It’s important to get an estimate of your closing costs before you start the loan process, so you have a clear idea of what to expect. You can also work with your lender to negotiate the costs or find ways to reduce them, such as asking the seller to contribute to your closing costs.
You can also use a closing cost calculator to get a better understanding of the costs involved in your specific loan. These calculators can give you a more accurate estimate of what you’ll need to budget for based on your loan amount, location, and other factors.
In general, however, you should plan to spend about 3% to 6% of your total loan amount on closing costs (as previously stated). Some borrowers pay for this expense using gift funds that have been granted to them by friends or family. Others choose to set aside a portion of their monthly income, rent out a room, or get a second job to cover the fees. There are plenty of strategies you can use; you just have to be willing to get creative!
Have Questions about Your Veteran Home Loan?
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