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The home buying process can be confusing, but...
Costs and Fees
One of the most popular benefits of a VA home loan is the treatment of VA home loan fees. VA home loans are easier to qualify for compared to conventional mortgage loans, they require no money down, and they also limit certain types of closing costs the VA borrower may pay. Even those limited costs can vary in nature based upon the service provided. This article will discuss a few of the charges a borrower may incur and explain them a bit further.
The appraisal fee is a fee charged to the VA borrower to pay for a property appraisal report. The appraisal report will determine the current market value of the subject property by comparing recent sales of similar properties in the surrounding areas. A VA lender will collect an appraisal fee from the borrower and order the appraisal report from the Veterans Affairs. And while the VA appraisal is provided for the lender’s use, the borrower has the right to receive a copy of the report when completed.
A home inspection is similar to the VA appraisal report, yet instead of determining the market value of the property, a home inspection searches for any repairs that need to be made in the house. A home inspector will review the roof, the attic, wiring, plumbing as well as the air conditioning and heating system to make sure everything is in good condition and proper working order. Any inspected items that need attention will be listed on the inspection report.
A home inspection can also include a pest inspection, which looks for current or previous infestation by wood destroying insects such as termites or carpenter ants.
The VA funding fee is one of the VA home loan fees charged on almost every VA mortgage. The exception is for VA loans issued to VA eligible borrowers determined to be disabled as a result of a service-related disability. The funding fee goes to finance the VA loan guarantee to VA lenders. If a VA loan goes into default, the VA reimburses the VA lender.
Closing costs in association with a VA loan are classified as recurring or non-recurring closing costs. Recurring closing costs are fees that will occur again in the future such as loan interest and homeowners insurance. Non-recurring VA closing costs are fees that will occur once during the VA loan approval such as an appraisal or credit report.
Earnest money is an amount provided by the VA buyer to be held in escrow, against the contract of sale. The earnest money deposit demonstrates “good faith” by the VA borrower that they intend to buy the subject property. The earnest money will be credited back to the VA borrower at closing.
These different costs are some of the most common fees incurred by veterans as their VA loan application is processed and approved. There are other VA home loan fees involved and there are ways to reduce or eliminate certain VA loan fees. Most fees are not “out of pocket,” and can be rolled into the balance of the loan.
If you have any questions regarding these and other VA loan fees, call us today and we’ll be happy to assist you.