Sometimes it seems like a roll of the dice to find the perfect balance between low mortgage rates and minimal fees. In general, VA rates are easy to find but knowing what fees are involved are a different story. In another article that addresses the troubles veterans face when searching for “How much are VA Closing Costs?” As mentioned in the article, yes, there are fees involved with VA loans. In general, lenders either don’t want to address the subject or want you to believe that they are non-negotiable. Most want to simply brush the subject off by telling you the seller will pay them for you.
Let’s get to what you’re looking for...
I’m going to list out fees as you might find on an Estimate of Fees Worksheet or Good Faith Estimate. In most cases, these will be general charges and not necessarily specific to your situation. A good example is state transfer taxes. Not every state has this. This is where speaking to a Loan Officer would be helpful as they have better access to this information.
The important point here is this is only a list of POSSIBLE fees that can be charged to the veteran. Again, with the right lender, yes, they can be reduced or eliminated all together from your costs. Also, keep in mind this is a list of “closing costs”. The term closing costs encompasses all settlement charges. Fees are only one aspect of the total closing costs.
Quick Cost Key
Next to each charge you will see a series of “$$” as well. This is listed to show you which fees are generally the highest and which are lower. This is important to know when reviewing Estimate of Fees Worksheets or Good Faith Estimates. It can help determine which lender might have the better offer. Actual Closing “Fees” will have one or more RED $$. These will be charges made by companies or government entities in conjunction with originating and/or closing a VA loan. The more $’s the more expensive this fee can be.
Pre-paid items will be listed with blue $$. They will include any charges that are associated with the payment of the loan. These are the most unpredictable of all charges as they are determined by other factors generally unknown to the Loan Officer in the beginning. These charges shouldn’t be ruled out when determining how much money the transaction will cost. In fact you should pay closer attention to these numbers when comparing lenders. Often times lenders use these charges to skew their closing cost results, thus making an offer look more attractive to the customer.
General List of Potential VA Loan Closing Costs
Origination ($ - $$$$)
VA allows every lender to charge this on VA Loans. In most cases, lenders are taking advantage of this and somehow making the veteran believe this is not negotiable. NOT TRUE! With the right lender, this fee can be completely waived while not affecting the rate at all.
Discount Points ($ - $$$$)
Discount points, often called “Points” are a way of prepaying interest It is a percentage of the loan amount. One point is equal to one percent of the loan. Points are a way to reduce the interest rate. Again, with the right lender, this fee is not necessary as VA rates are already discounted.
If you’re counting, this is already 2% of the loan with the wrong lender. Considering a loan of $300,000, that’s $6,000 in unnecessary fees.
VA Appraisal ($$)
This charge is not negotiable but can be paid by the lender at closing. The fee is determined by VA. It can range from $350 to $450 or as high as $600. You can find VA appraisal fees in your area on VA’s website.
Credit report ($)
This charge will depend heavily on the company the lender uses as well as how many items on the report that need updated. This charge can range anywhere from $8 for a single veteran to $75 for a couple with credit issues.
Flood Zone Certificate ($)
All lenders order a Flood Zone determination report. This fee generally is $14-19
Title and Closing Fees ($$$)
These fees are determined by the title company that issues the title. Total title and closing fees can differ by hundreds of dollars from one title company to another. They can vary by even more from one state to another as well.
For instance, if you are in a state that requires an attorney to facilitate the closing, all charges will be issued through the attorney’s office and closing fees. Closing fees are generally always higher in attorney states versus title closing states.
Overall, title and closing fees are determined by the loan size. Depending on loan size, type of transaction (purchase/refinance) and geographic location, title and closing fees can fall in the range of $500 for smaller loans to over $3,000 for Jumbo VA loans. If you would like a more accurate title quote, complete the form below requesting an estimate of VA loan closing costs.
Government Recording Fees ($ - $$)
These charges are associated with every mortgage filing and not just VA. The county the property is in charges a per page fee to record the deed and the mortgage. These fees combined can range from $50 to over $300 depending on the county.
Ok, have you been keeping a tally on the fees so far? It’s somewhat difficult to have an exact number as most fees are many determining factors. However, if we take the average of all fees that have ranges and consider a loan amount of $300,000, the total so far is approximately $2,250 not including origination and discount. If you’re using a lender that charges an origination fee and or discount points for your VA loan (don’t know why you would), then the fees are close to $8,400.
The fees in RED below this do not apply to every veteran but never-the-less, can be extremely expensive and shouldn’t be overlooked as they could apply to you. So look through them. If you are to be charged any of these fees, you will see how much more important it is to find a lender that waives their fees for you.
Funding Fee ($$ - $$$$$)
This is a charge from Veteran’s Administration. Contrary to some beliefs, VA is not a lender. VA is actually a mortgage insurer. The VA funding fee is collected so that VA can guarantee (insure) the loan. The funding fee is determined by a combination of loan type (purchase, VA streamline refinance, etc.), veteran’s military status (active duty or reserves) and number of times they’ve used their eligibility. This charge ranges from 0.5% of the loan amount for a VA Streamline Refinance (IRRRL) to as high as 3.3% for subsequent use purchase or regular refinance and can be financed into your VA loan, rather than paid directly by you at closing. To find out how much this charge would be for you, refer to VA Funding Fees.
Transfer Taxes and State Tax Stamps ($$$ - $$$$$)
In some states, like California, this is an illegal charge. However in states like New York, Virginia, Maryland, Florida, Washington and a list of others, this charge is very common….and extremely expensive. This is a charge set by either the county, city or at the state level. It is exactly what it states…another tax.
The amount of these charges will depend on what city, county or state the property is in, as well as the value of the property. These fees can be the most expensive charges a home buyer or home owner will pay at closing on a mortgage. There are lender credits available that can cover most if not all of these charges. You will need to speak to the Loan Officer to get details. This charge can be anywhere from $1,000 to well over $15,000.
Survey ($$ - $$$)
A property survey is a sketch or illustrated map of a piece of land. Included on a survey are the property boundaries and physical features. This is only required in a few states. So you may not need to worry about this fee. However, if you are in a state that requires surveys, you could pay anywhere from $300 to $3,000 depending on they type of survey as well as other variables. You should refer to a realtor for an idea on whether a survey is needed and what they might cost.
Prepaid Interest ($ - $$)
This is daily interest due from the date the loan funds until the end of the month. Technically your loan begins on the day it funds but of course, the loan paperwork must go through a process before it can be fully serviced. This is why you have a month where you don’t have to make a payment on your new mortgage. However, your payments will always include the interest from the month prior to make up for the month in-between closing and your first payment. This charge can actually be a negative if interest is credited back to the end of the last month. If you close on a loan mid month though, depending on rate and loan amount, it could be anywhere from $100 for a small loan to a couple thousand for a Jumbo VA loan.
Property Tax and Insurance Escrow ($$ - $$$$$)
In most states on the west coast, this is called “Impounds”. VA actually requires the property tax and insurance to be paid with the mortgage payment.
For refinances, lenders collect enough taxes and insurance upfront to allow them to pay these annual fees on their due dates. The value of the property has an impact on this amount. The closing date in relation to the due dates also plays an important factor. A closing date that is only a couple months away from the due date will require an entire year plus reserves collected whereas a closing date right after the charge has been paid will only need a couple months collected. There is no way to tell you how much you can expect to pay here. Tax and insurance vary tremendously based on geographic location, home prices and state and county tax rates. Take a look at your mortgage statement to determine how much your current escrow balance is and add 2-3 months to that amount. That will get you a good idea.
For purchase transactions, only 2-3 months of taxes and insurance is collected. However, often times property taxes will be required to be paid upfront, depending on the county requirements. In addition, a full year of hazard insurance is always collected on purchase transactions. For more information on county property taxes, refer to the MLS listing or consult a realtor. You will need to discuss hazard insurance premiums with your insurance agent.
So you might see how a mortgage transaction can be very expensive. This is why it is extremely important to cut costs where you can. Times have changed. More people are getting information and purchasing goods and services online than ever before. Local brokers and mortgage companies do not do enough VA loan business to keep their pricing down, let alone know everything there is to know about VA loans to keep you from harms way. Find a VA Loan Specialist that has years of experience doing VA loans. There are companies brag about doing all VA loans and how many years they’ve been doing them. These same companies hirer Loan Officers are often times greenies in the industry just to save money.
Be watchful and ask questions. Often times when you do a little digging, you find out things lenders don’t want you to know…like knowing there are lenders that waive their origination fees without raising the rate…and still just so happens to be lower than theirs.
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