Working with a VA loan buyer? Because VA loans are designed to assist military families, they have some special requirements and fee restrictions. Here’s what you need to know about VA loan fees and what you might be responsible for paying.
VA Loan FAQs:
VA loans are unique for a number of reasons. A VA loan:
- Is only available to eligible military veterans and family members.
- Limits the amount of money a veteran can be charged for closing costs.
- Defines which types of real estate transaction fees are allowable and which are non-allowable.
- Allows lenders and / or the seller to contribute funds at closing.
Let’s take a look at some more details.
Laws allow a VA buyer to pay the following:
- Appraisal Fee: charged by the appraiser; covers the cost of determining the value of the property.
- Credit Report Fee: charged by the lender; covers the cost of credit report for the buyer(s).
- Title Insurance: charged by the title company; covers title insurance to protects the lender.
- Loan Origination Fee: charged by the lender; covers expenses related to funding the loan.
- Recording Fees: charged by the county recorder; covers the cost of recording the house deed.
- Survey Cost: charged by a survey company; covers defining property boundaries (only in some states).
Military.com suggests the acronym ACTORS offers a helpful way to remember which fees are allowable.
Some of the more common fees that a veteran is prohibited from paying include:
- Attorney’s Fees: charged by an attorney; covers prep and review of legal paperwork (only some states).
- Document Fees: charged by the lender; covers the cost of preparing mortgage documents, etc.
- Escrow Charges: charged by the title company; covers the cost of conducting the closing.
- Loan Underwriting Fee: charged by the lender; covers the cost of researching buyer loan approval.
- Tax Services: charged by the lender; covers the cost of paying property tax from the buyer’s mortgage.
Some lenders charge a flat loan origination fee, which can include one of more of the above charges, as long as they are not charged separately.
Pros & Cons of Selling to a VA Buyer:
For most homeowners, selling to a VA buyer is no more difficult than selling to any other type of buyer, even though the VA is more stringent in terms of appraisals and property condition. However, if your home is in need of repairs or is considered a “fixer-upper,” a VA buyer will not usually be your best bet.
Managing VA Fees:
The VA loan program is designed to allow military families the opportunity to purchase a home with a minimal amount of up-front cash. But the program is not meant to be a burden on the seller, either. To make sure sellers don’t get the short end of the stick, the VA limits how much sellers can contribute towards covering non-allowable VA fees. They also allow lenders to use credits and agents to use fee adjustments cover costs. When it’s time to build an offer, whoever is helping you sell your home will help you understand costs and to determine the best way to structure your sale to make sure you’re getting a fair deal.
Now that you understand the basics of how VA loans work, what VA buyers pay for and what you will be responsible for, you can head into your home sale with confidence.
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