If you’re an active duty service member, veteran, or surviving spouse, you may already know you’re eligible to apply for a VA loan. Guaranteed by the U.S. Department of Veterans Affairs, VA loans offer a host of benefits, including competitive interest rates, no to low down payments, and no monthly mortgage insurance requirements.
But does the VA loan cover closing costs? The answer is no, but unlike many other types of mortgage loans, VA loans provide for a much wider array of seller-paid closing cost options. And given that closing costs can add many thousands of dollars to the cost of your home loan, seller-paid costs are a great benefit.
Read on for more details on which seller-paid VA loan closing costs are allowable.
VA loan closing costs you can ask the seller to pay
One of the key benefits of a VA home loan is that you can ask sellers to pay almost all of your loan-related closing costs up to 4% of your total loan amount. So if you have a $200,000 VA loan, the seller can pay up to $8,000 in closing costs and concessions.
Here are some seller-paid closing costs you could enjoy on a VA loan:
- Prepaid taxes and insurance costs
- Discount points to lower your interest rate
- State and local taxes
- Judgments or credit balances that may prevent you from qualifying for your VA loan
VA Loan Closing Costs You May Pay
While the VA will allow the seller to pay most of your closing costs (if the seller agrees), there are some costs you will have to pay if the seller won’t. However, it’s always a good idea to ask the seller to cover as many of the below allowable and unavoidable VA home loan costs as possible:
- Home appraisal
- Credit report
- Title insurance
- Origination fees
- Deed recording and survey
In addition, you’ll also have to pay what’s known as the VA funding fee. Since VA loans don’t necessarily require down payments or monthly mortgage insurance payments, this one-time fee helps lower the cost of the loans for U.S. taxpayers. The amount of your fee will depend on the size of your down payment and whether or not this is your first VA loan. However, you also may be able to negotiate the seller paying that VA funding fee for you.
VA loan fees your lender can’t charge
Another advantage of obtaining a VA loan is that Veterans Affairs will not permit lenders to charge you an array of fees (beyond that 1% origination fee) that are common in most conventional mortgages. Some of those non-allowable fees include the following:
- Lender-ordered appraisals
- Lender-ordered home inspections
- Document preparation fees
- Attorney fees
- Mortgage rate lock fees