Do Disabled Veterans Pay Closing Costs

Additional Va Loan Fees Paid At Closing

An overview of closing cost assistance for VA loans

When opening a VA loan, you will likely have to pay closing costs in addition to the funding fee. What makes VA loans unique is that the VA limits the amount of fees youre able to be charged at closing. For example, your lender can only charge 1% of the loan amount in origination fees, which may include a processing fee, an appraisal fee, attorney fees, recording fee, title fees and taxes. According to Consumer Financial Protection Bureau, the average origination costs on a VA loan were $1,402 in 2021 and the total average closing costs were $8,391.

How To Reduce Va Closing Costs

You can reduce how much you spend on VA closing costs in a variety of ways, such as:

Making a down payment to reduce the VA funding fee
Applying to eliminate it, if you qualify
Negotiating so that the seller pays most of the closing costs
Purchasing discount points to reduce the interest rate on your loan

Keep in mind that every mortgage point costs 1% of your total home loan. When deciding whether to buy the discount points, compare other uses for that money. For instance, making a 10% down payment reduces the amount you pay for the VA funding fee. If you cant afford a 10% down payment while buying points, it may not be worth buying them. Ask your lender to calculate your monthly mortgage payment with and without discount points. Then, youll know which option is best for you.

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Can You Add The Va Funding Fee To Your Loan Amount

Yes, in most cases you can add the cost of your funding fee to your loan amount. This means you don’t need to pay the funding fee in cash at closing. Adding the fee to your loan amount is likely to increase your monthly payment and the total amount of money you pay in interest over the life of the loan, however.

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Who Is Eligible For A Va Loan

As a rule of thumb, almost all active duty or honorably discharged service members are eligible for a VA loan.

You may be eligible for a VA loan if any one of these statements describes you:

I served 181 days during peacetime.
I served 90 days during wartime.
I served 6 years in the Reserves or National Guard.
I am the spouse of service member who was killed in the line of duty.
I currently receive disability payments from the VA.

What is the VA Funding Fee and is it required?

Yes, it is required. It is a fee paid directly to the Department of Veteran’s Affairs so that they can guarantee your loan and provide you with the opportunity to receive a loan with little to no money out of pocket.

How much is the VA Funding Fee?

It depends on several factors including: Whether you are Active Duty, Retired, Guard or Reserve and whether you this is a first time use, subsequent use, or a cash-out refinance as well as how much of a down payment you are putting down. The fee can range from as little as 1.25% up to 3.3% of the loan. Generally, the more money you put down the lower the VA funding fee. Please contact us and we will help you to determine how what the exact cost of the VA Funding Fee would be for your particular situation.

Do I have to pay the VA Funding Fee out of pocket?

No, you can include the VA Funding Fee in your loan and pay the funding fee over the course of your loan.

Do I still have to pay other normal closing costs like Appraisal, Title and Escrows?

Types Of Closing Costs

A common way to remember which costs a veteran is allowed to pay for is to remember the acronym ACTORS. That stands for:

R Recording Fee

These are common charges found on most every VA mortgage and while they can vary a bit by amount these fees are the ones that can be paid for by the veteran. But what about these charges?

These fees, and others, are example of charges that the veteran is not allowed to pay. Even though the VA lender requires a processing and an underwriting fee in order to approve the VA loan, the veteran may not pay for these charges and any other fee deemed “non-allowable.” So if the veteran can’t pay them, who does?

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Who Can Get A Va Funding Fee Exemption

The VA funding fee exemption applies to eligible military service members, veterans or surviving spouses that have a VA-approved disability related to their military service. Considering VA funding fees range from 0.50% to 3.60% of the loan amount the exemption could save borrowers $1,500 to $10,800 in VA closing costs on a $300,000 mortgage.

According to VA lending guidelines, you may be exempt from the VA funding fee if:

You receive VA disability compensation for a disability related to your military service
Youre eligible to receive disability income for a service-related disability, but instead receive retirement or active-duty pay
Youve received a proposed or memorandum rating dated before your loan closing that states your service entitles you to receive compensation
Youre an active-duty service member who has received the Purple Heart
Youre the surviving spouse of a veteran who died while on duty or because of a service-related illness or disability

Online resources are available to help you determine your eligibility for VA disability benefits. The VA makes the final decision based on your disability claim.

How Much Are Va Loan Closing Costs

VA loan closing costs are typically 1-5% of the loan amount. So for a $200,000 mortgage loan, closing costs could be anywhere from $2,000 to $10,000. Part of the reason VA closing costs vary so much is that the VA funding fee can be anywhere from 0.5% to 3.6% of the loan amount depending on your loan type.

Below are some rough estimates of closing costs amounts for a VA loan. Keep in mind the types of fees and their amounts vary greatly by geographic location. Your scenario might look very different.

The best way to get a better estimate is to talk to a loan professional about your situation. But the following will give you a general idea of potential costs.

Well break the closing costs down into three categories:

VA and lender fees
Pre-paid and prorated charges

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Do You Pay A Va Funding Fee On A Refinance

Yes, you are required to pay a VA funding fee on a refinance that uses a VA loan. VA cash-out refinance loans have a set funding fee of 2.3% for first use and 3.6% for your subsequent use. VA Interest Rate Reduction Refinancing Loans have a set funding fee of 0.5%. The VA funding fee percentages stay the same regardless of your down payment amount.

Va Loan Closing Costs

Veteran Benefits All Disabled Veterans Qualify For

While closing costs are generally minimal with a VA loan, homebuyers may want to budget for these as well. Unlike funding fees, closing costs can not be rolled into the loan amount.

The following fees may apply to your VA loan application:

Charges to pull credit reports and credit scores
Costs to do a property title search
Determination of whether the home requires flood insurance
Taxes and assessments based on federal, state and local laws

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What Va Loan Closing Costs Do I Pay

The following is a list of VA loan closing costs that you may have to pay:

VA funding fees based on the chart above
Origination fees charged by your lender for approving your loan
Mortgage points paid to get a lower rate
and the balance of any credit card or judgements you must pay to qualify
VA appraisal fee to confirm the value of your home
Homeowners insurance to protect you against hazards like fire, theft or vandalism
State and local property taxes
Title insurance to protect you against claims by prior owners of the home youre buying or refinancing
Recording fees to update public records of liens or ownership changes to your home

How To Get A Va Funding Fee Refund

If your VA disability compensation was awarded after your mortgage closing, you might be eligible for a VA funding fee refund. However, your VA disability compensation approval must be effective before your loan closing date to qualify for the refund.

For example, if you closed your loan on Oct. 30 and your disability compensation award is effective retroactively to Oct. 1, youre eligible for the refund. Reach out to your mortgage lender directly or the VA regional loan center at 877-827-3702 if you believe youre entitled to a VA funding fee refund.

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What To Know About Va Loan Estimates

A loan estimate is a three-page document that breaks down the details of a mortgage. Buyers should request these estimates while shopping for a mortgage so they can effectively compare offers. Heres what to look for in a loan estimate:

VA closing costs are typically 3% to 5% of the total loan amount.

Do Veterans Have To Pay Closing Costs

There are closing costs associated with any mortgage that have to be paid by the client. VA loans are no exception, but the VA seller concessions policy allows the seller to pay for a larger amount of these costs then they could on many other loans.

Theres no limit on the amount someone can choose to contribute to the following categories:

Origination fees:Most mortgage lenders charge origination fees for processing the loan application and paperwork.
Discount points: These are prepaid interest points. Prepaying some of your interest ahead of time enables you to lower your interest rate.
Miscellaneous fees:These include things like paying for credit reports, property surveys and appraisals.

There are certain things a seller can only pay up to 4% of the purchase price or appraisal for, whichever is lower. This limit applies to escrow items as well as the VA funding fee.

However, if youre a disabled veteran you may be able to get out of the funding fee. More on that below.

In addition to the seller concessions option, you can choose to take lender credits for part or all of the closing costs. In this case, these are built into the balance of the loan and paid off over the loan term.

How To Complete A Va Funding Fee Exemption Form

To determine your eligibility for the VA funding fee exemption, your lender completes Form 26-8937 to confirm any disability payments you receive. You may need to provide your VA claim folder number or your service number . Youll then certify that youre receiving those benefits, and the form is sent to the VA for verification.

In many cases, your funding fee status will be reflected at the top of your certificate of eligibility . Your lender will automatically remove the funding fee from your VA loan costs upon receiving a COE with a funding fee exempt status.

Do Veterans Pay Closing Cost

How Much Are VA Loan Closing Costs? The exact amount that youll pay in VA loan closing costs will vary based on the home you choose and the details of your loan. However, you should expect to find closing costs between 3% to 5% of the total value of the loan.

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What Types Of Va Loans Are Available

Through the VA mortgage program, veterans, active duty military members, and qualifying surviving spouses have access to a range of loan products.

These include:

VA Streamline refinancing
VA construction loans
VA manufactured home loans
VA loan assumption

Regardless of ones status as a homeowner or home buyer, the VA mortgage program is likely to offer an attractive option for those who qualify.

The Va Limits What Buyers Can Pay

Service Disabled Veterans Insurance: Donât Miss This Opportunity

If the option to buy with 0% down wasnt incentive enough for eligible buyers to use the VA loan program, this one certainly sweetens the pot.

The Department of Veterans Affairs has a list of non-allowable feesloan fees that the veteran or active-duty member isnt allowed to pay. That means these loan costs will need to be covered by the seller, the lender, or the real estate agent.

Those non-allowable costs and fees include:

Pest inspections on purchase transactions
Broker fees or real estate agent commissions
Penalties for loan prepayment
Excessive recording fees

In addition, the VA limits what lenders can charge to cover their origination and administrative costs.

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What Makes Va Closing Costs Different

Mortgages backed by the VA are inherently different from standard mortgages because the Department of Veteran Affairs promises lenders that they will be able to recoup someâor allâof the loan if the home goes into foreclosure. That kind of backing significantly lowers the amount of risk the lender anticipates by providing the loan, thus allowing veterans to get approved even if they don’t offer a down payment.

Because lenders generally see them as a safer bet, VA-backed mortgages offer lower closing costs. Though typical closing costs range anywhere from 2% to 5% of the home’s purchase price, similar costs for VA-backed loans have a funding fee rate that sits between 1.4% and 2.3%, according to the VA. Using that same example from above, a home listed at $391,200 would have only $8,998 in closing costs.

How To Pay The Va Funding Fee

The VA funding fee is due when the loan closes. It is not due when you apply for the loan or at any prior stage of the process.

That said, you have some options for paying the funding fee. You can pay all or part of it in cash on closing day if you wish. But most veterans choose to include the fee in their loan amount.

Rolling the funding fee into your loan eliminates the need for additional cash at closing. But it also means you pay interest on your fee for the life of the loan and your monthly payments will be slightly higher.

Motivated home sellers can also pay the funding fee as well as some closing costs, including the appraisal, title, and loan origination fees. The total of all costs paid by the seller, including funding fees, cannot exceed 4% of the loan amount in most cases.

If the funding fee is 2.3%, that uses up over half of the allowed amount of seller-paid closing costs. Still, it could be a wise choice to have the seller pay this fee for you if youre short on upfront cash.

What Is The Va Funding Fee

The VA loan funding fee is an administrative fee added to most VA mortgages. The amount varies based on your circumstances first-time buyers with zero down pay a 2.3% funding fee while repeat VA loan users could pay up to 3.6 percent. Most VA borrowers roll the fee into their loan balance so they dont have to pay upfront.

The funding fee supports the VA loan guaranty program so that these mortgages can remain low-cost and available to future veterans and military service members. As a result, VA home loans offer some of the best benefits in todays real estate market, including low interest rates, zero down payment, and no private mortgage insurance.

In this article

Do I qualify for a VA loan?

How Much Are Va Closing Costs And Fees

Youll typically pay between 2% and 6% of your loan amount toward closing costs on most mortgage loan programs. However, VA loan guidelines set restrictions on the types of fees you can be charged and lender fees cant exceed 1% of your loan amount.

Youll also pay a fee unique to VA loans: the VA funding fee. This fee is expressed as a percentage of your loan amount and ranges from 0.5% to 3.6%. Its used to offset the taxpayer cost of the VA loan program and the amount charged varies based on three factors:

Your down payment. The higher your down payment, the lower the funding fee.

Whether youre buying or refinancing. A higher down payment will reduce your funding fee if youre buying a home meanwhile, a regular refinance or VA cash-out refinance requires higher funding fees. However, the VA interest rate reduction refinance loan only requires a 0.5% funding fee

Whether youre using your benefits for the first time. Youll pay a lower VA funding fee the first time you use your VA mortgage benefits. The fee goes up for every subsequent no down payment or VA refinance loan you take out.

The VA periodically adjusts the VA funding fees the chart below shows the most current VA funding fee schedule:

Purpose of loan
0.5%

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Va Funding Fee: How Much Will You Pay In Va Loan Fees

Additional VA loan fees paid at closing

For qualifying military members and veterans, a VA loan can offer great benefits including below-market interest rates, low- or zero-down payment options and no mortgage insurance premiums.

To maintain these perks, the U.S. Department of Veterans Affairs requires a one-time VA funding fee that is either paid at closing or rolled into your loan amount. The funding fee may vary based on your type of VA loan, usage and down payment amount. There are also some exemptions that allow you to waive the funding fee altogether. Heres what you need to know about VA funding fees.