Let’s get it on the record first. There are costs involved with every VA loan…every mortgage for that matter. The real question should be “why won’t lenders talk about how much VA loan closing costs are?” Before any veteran chooses a lender, either of these questions should be on top of the list of VA loan research subjects. In fact, open a new tab right now and type “How much are VA closing costs” in the search bar. Look at each search results. How many lenders actually address this question directly?
Here’s what I found when I did a Google search for “How much are VA loan closing costs”:
Lender #1 Google search result (picked first because there was a picture):
“Sellers can pay all of a VA borrower's closing costs, but there is a 4 ... is no cap on how much a seller can contribute on VA loan closing costs.”
What? There is a 4? There is a 4 somewhere in the costs? Ok, this raises my curiosity. So I check it out.
Although it was informative, the article to this search result did not directly answer my question. It did however address the fact that there are costs involved with every mortgage but goes on to discredit the good lenders out there by stating “even ones advertised as “no closing cost” loans”. A couple paragraphs down from that, the lender’s author adds that “VA lenders generally charge borrowers a 1 percent origination fee”.
This all tells me that this particular lender does not offer “no closing cost” or in other words, “Zero origination fee” VA loans…not interested. So back to the search results.
Lender #2…or is this the same lender?
When I look at both sites, they are totally different companies. Yet they both have the same NMLS (Nationwide Mortgage Licensing System) number? An NMLS number is the federal registry number assigned to ONE company. So how can they do business as two different companies?
Ok, as I generally do with internet research, I’m getting off subject.
Getting back to lender #2 search result, the snippet says:
"Jump to How much of a down payment will I need for a VA Loan? - ? You do not need a down payment for a VA Loan unless the home you intend ..."
Again, this doesn’t answer the question at all. I didn’t ask how much of a down payment I need. Is there nobody that can answer this question? How does the biggest and best search engine in the world get this search result so wrong?...feel a headache coming on.
When I explore this site, I get a very vague but positive introduction. It states the company is there to “make the process of obtaining a VA Loan simple and worry-free”. I feel warm and fuzzy. It goes on to claim that they work “to save you as much money in the process as possible”. I know for a fact this isn’t true. This company has been the biggest violator of veteran origination charging since they opened their doors 2 decades ago.
Reading on, and before they slam you with over a dozen links to their site (a technique used to rank higher with Google and get into more of your search results and probably why they even showed up at all), they tell you that questions about closing costs are best answered by calling them.
So a slick sales guy or sly saleswoman can get their hooks into me? I don’t think so. On to the next and last search result.
Lender #3 search result:
“The loan amount will be the purchase price or appraised value, whichever is less (plus the VA Funding Fee). So if you want your closing costs covered by the …”
AGAIN, how does this little snippet tell you how much VA closing costs are? What if I’m refinancing?
The first paragraph that addresses closing costs on this web page, like all of the other lenders, talks about how you can “minimize your costs” by having the seller pay your costs for you. This actually doesn’t “minimize” your cost. It merely extends it. I’m sure at some point you’re going to sell a house. When someone comes to you asking to pay thousands of dollars of their fees, what are you going to do? The logical and most financially sound decision is to raise the purchase price...right after you refer them to VAloanlending.com so you won't have to raise the purchase price so much to cover (shameless plug. I know.)
So these lenders that are graciously offering advice to have the seller pay your costs for you, are simply having you pay THEIR costs plus interest over the term of the loan. This is not a favor, especially knowing they are charging an enormous origination fee.
True, it is one way to minimize your costs. However, you should always compare your options to be sure this is the best way. If you are trying to find out how much VA closing costs are, check out the list of closing costs you can expect to find on a VA loan. However, if it is your goal to truly save money on costs, the first step is to find a lender that will waive their origination fees without raising the interest rate or asking a seller to pay them for you. Then you can get an estimate on all third party costs that will be involved in your state and county. Once you have that figure, any good Loan Officer should be able to show you more than one solution to reduce this cost to you and not just pass it on to the seller.