VA home loans available to active military and veterans are possibly the best loan available today because:
The loan is a 30 year fixed interest rate. Interest rates are close to the lowest they have EVER been. VA loans are not credit score driven and have flexible underwriting guidelines to get active military and veterans qualified. VA loans do NOT have monthly mortgage insurance, unlike FHA loans, or conventional loans with less than 20% down.
VA loans are not credit score driven and have flexible underwriting guidelines to get active military and veterans qualified
VA loans do NOT have monthly mortgage insurance, unlike FHA loans, or conventional loans with less than 20% down
The buyer will have to pay for a home inspection. Though optional for a VA buyer, it is highly recommended to have a home inspection. As an independent 3rd party the inspector will inspect all aspects of the house such as the structure, electrical, plumbing and more. It is so that you know you are making a sound investment. Home inspections generally run about $300. This has to be paid up front by the buyer.
There are 3 major upfront costs required when buying a house with a VA loan; the earnest money deposit, home inspection fee and appraisal fee. When you make an offer to buy a home, it is customary to put up an earnest money deposit with your offer to show the seller you are serious. This can range from 1-3% of the property purchase price. These deposit funds will be held with an escrow company after your offer is accepted. If you negotiate for the seller to pay all of your closing costs, you will get this money refunded when you close on the house.
You will have to pay the appraisal. When you purchase a property, the lender will require an appraisal on the property. A VA appraisal currently costs $400.
And lastly, you will have to pay of the VA appraisal. When you purchase a property the lender will require an appraisal on the property, this has to be ordered right away in the purchase of property. A VA appraisal current costs $400. So to recap, in the beginning stages of buying a house, you will have to come up with an earnest money deposit, $300 for a home inspection and $400 for an appraisal.
After the upfront costs discussed above, the rest of your closing costs will be paid when you close on the house. The rest of your closing costs can be broken into 4 categories; lender fees, title/escrow fees, and reserves and pre-paids taken by the lender. There are certain fees that the VA borrower is NOT allowed to pay. These will have to be paid by the seller. The major fees the VA borrower is NOT allowed to pay for are:
When you buy a house, the closing is handled by an escrow company. There fees are an escrow fee, notary public fee, and a few other fees for handling the closing. These fees will not have to be paid by the VA borrower, but they will have to be included in the credit that you ask for from the seller. These fees can amount to on average over $1,000. Additionally when you buy a house you will be required to obtain 2 title insurance policies, owners and lenders. The seller will typically pay for the owners policy and the buyer will pay for the lenders policy. The cost of title insurance depends on cost of the property. It will be around $400 for a $300,000 house.
When you get a VA home loan, you will have to pay the interest on the loan from the day you close until the end of the month. So for example if you closed on your new home May 5th, you would owe interest on the loan from May 5th to May 31st. This is called pre-paid interest and is part of your closing costs. But then your first payment would not be until July 1st. So you essentially get to skip the June payment even though you move in the house May 5th. The reason for this is because mortgage payments are made in arrears or behind . You made your May payment as part of your closing costs, and you wont make your June payment until July 1st. It can be advantageous to time your closing at the end of the month, so you limit the pre-paid interest and reduce your overall closing costs.
When you obtain a VA home loan, you will have to pay the interest on the loan from the day you close until the end of the month. So for example if you closed on your new home January 10th, you would owe interest on the loan from January 10th to January 31st. This is called pre-paid interest and is part of your closing costs. But then your first payment would not be until March 1st. So you essentially get to skip the February payment even though you move in the house January 10th. The reason for this is because mortgage payments are made in arrears. You made your January payment as part of your closing costs, and you wont make your February payment until March 1st. It is a smart idea to time your closing at the end of the month, so you limit the pre-paid interest and reduce your overall closing cost
When you obtain a VA home loan the lender will collect a reserve of property taxes and homeowners insurance. The lender can require sometimes as much as 9 months of property taxes paid up front at closing. This can be a large expense. If your property taxes are $300/mo, this means the lender could potentially take a reserve of $2,700. In addition, the lender will take a few months of your homeowners insurance up front in advance. It is very important for you to plan for this cost at closing or arrange for the seller to credit you this cost. Property tax reserves required by the VA lender are one of the largest costs related to closing and can catch the borrower by surprise at closing if this is not fully explained up from by the lender. But remember, this is really not a loan cost. These are property taxes that you will have to pay anyway as part of ownership; you are just paying them in advance. If you sell or refinance, you will get a refund of any remaining property taxes or home owners insurance held in reserve by the lender.
The VA charges a 2.15% funding fee for VA borrowers using their VA eligibility for the 1st time and 3.3% for those using it for the 2nd time or subsequent times. If you have 5% or more down payment, this funding fee is less than the above stated percentages. Also, if you have a 50% or greater VA disability rating the funding fee is completely waived. VA allows this fee to be rolled into your loan. You do NOT have to come out of pocket for this fee.
VA Funding Fee The VA charges a 2.15% funding fee for VA borrowers using their VA eligibility for the 1st time and 3.3% for those using it for the 2nd time or subsequent times. If you have 5% or more down payment, this funding fee is less than the above stated percentages. Also, if you have a 50% or greater VA disability rating the funding fee is completely waived. VA allows this fee to be rolled into your loan. You do NOT have to come out of pocket for this fee.
Thee closing costs associated with buying a home with a VA home loan can total from 2-4% of the purchase price. It is very important to either plan to have money set aside for these costs or work with the real estate agent who will represent you to negotiate with the seller to pay for your closing cost
