Two of the primary benefits of a VA loan are the zero down payment feature and limited closing costs. The VA doesn’t require a down payment for a home loan and also limits the types of closing costs the veteran is allowed to pay. VA lenders provide borrowers with a list of fees that might be expected at the closing table very early on in the process, even before a property is picked out. Still, parsing through the various loan charges it’s a bit confusing. Let’s clear the air.
First, veterans are not allowed to pay for specific fees, most often ones the lender charges other borrowers. Such charges are escrow or settlement fees, underwriting, processing and document fees. In lieu of these lender charges, the lender may instead charge an origination fee of 1 percent. You’re also not allowed to pay for termite inspections or legal fees that don’t have anything to do with a title report.
What fees may be paid? You can expect to pay for an appraisal, credit report, title insurance, recording fees and a survey where needed. These are the one-time charges associated with closing the loan. There are other charges that you will see at the closing table called “recurring” charges because you’ll pay for them over the life of the loan. Such fees include hazard insurance to protect the property and funding an escrow or impound account to cover annual property taxes and insurance premiums when due.
When first handed a closing cost estimate, it will look confusing. But don’t worry, everyone who first sees such a document will have a few questions. Just take some time and go over these charges with your loan officer who will explain who pays what and when. After the review, you’ll know how much you’ll need to have at the settlement table.