VA Closing Costs Explained

11.10.2021 | Category: Homebuying

If you're a veteran looking to buy a home in the near future, a VA mortgage loan with Mutual of Omaha Mortgage can help you purchase your dream home. With competitive loan rates and affordable closing costs, a VA loan can help you reach your goals while balancing your financial needs.

Before learning if a VA loan is right for you, learn about the different elements of a VA loan including the VA funding fee and closing costs.

What is a VA funding fee?

The VA funding fee is a one-time fee that a veteran service member, active-duty service member, or veteran survivor pays on a VA-backed or VA-direct home loan. If you're using a VA-home loan to purchase a new home or refinance a mortgage, you'll need to pay the one-time fee unless you meet very specific criteria.

How do I pay a VA funding fee?

In most cases, you can roll the VA funding fee into the loan like many homebuyers roll closing costs into the loan. If you plan to go this route, be sure your monthly payment budget reflects this so you’re not surprised by a slightly larger monthly payment than you're expecting. Rolling the VA funding fee and closing costs is still an affordable option if you're looking to save money on your upfront costs.

What are typical VA loan closing costs?

VA loans will also have typical closing costs like any other conventional loan including title, appraisal and origination fee among others.

Closing costs can also include any home inspection fees such as septic, well, and termite inspection fees however these charges aren't typically rolled into the loan and will need to be paid up front before your escrow closes.

In addition, you may need to pay a state or a local government recording fee to record your deed and mortgage related documents. Some of your real estate transactions will become public records and therefore there may be a fee associated with making them accessible to the public.

It’s important to know that if you're buying a home located within an HOA, there may be separate annual dues that will need to be paid before the mortgage loan closes.

For all VA loans, the VA funding fee is based on the type of loan product you are approved for and the total amount of your loan. The VA funding fee is a percentage calculated based on your total loan amount. Fees typically range from 1.4% to 3.6% depending on if you are a first time home buyer, the size of your down payment, or purchasing a second home.

Can I get my VA funding fee waived?

According to the U.S. Department of Veterans Affairs, some of the criteria that could get your VA funding fee waived include:

• Receiving VA compensation for a service-related disability
• You are eligible to receive VA compensation for a service-related disability, but your receiving retirement or active duty pay instead
• You are the surviving spouse of a veteran who died in service or from a service-related disability
• A service member on active duty who before or on the loan closing date provided evidence of having received the purple heart

If you already paid this fee and you feel you might be eligible for a refund, please call your VA regional loan center at 877-827-3702 to let someone from their office assist you.

Do I still need to pay a VA funding fee if I'm refinancing?

If you choose to use a VA-backed or VA-direct home loan to refinance your existing mortgage loan, you will still need to pay a VA funding fee. The VA funding fee is 2.3% for a first use loan and 3.6% after a first use loan. VA funding fee rates don't change based on your down payment if you are looking to refinance.

Do home buyers always pay closing costs?

Typically, the buyer is responsible for the majority of closing costs but can negotiate who will pay some charges including the origination fee, discount points, credit report, appraisal fee, title and recording fees.

The seller is generally responsible for paying the real estate agent’s commission, brokerage fee and buyer broker fee. It's important to note that in a competitive housing market, buyers should expect to pay closing costs and write that into their offers in order to be more competitive against other prospective home buyers.

If you are a veteran looking to purchase a home, Mutual of Omaha Mortgage is the premier home mortgage lender for our servicemen and servicewomen. Click here to learn more about how a VA-backed mortgage loan from Mutual of Omaha Mortgage can help you buy your home today.