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Veterans Affairs (VA) loans don’t require a down payment, but that doesn’t mean you can borrow without paying anything. One of the costs you will pay for a VA loan is closing costs. Here’s everything you need to know about VA closing costs.

What’s Included in the VA Loan Closing Fee

Mortgage closing costs combine many costs into one. For VA loans, your closing costs may include:

  • A loan origination fee
  • VA financing fees
  • Loan discount points
  • VA assessment fee
  • Credit application fees
  • Risk insurance
  • Property taxes
  • National and local taxes
  • Title insurance
  • Registration fees

VA Funding Fee and Appraisal Fee

While VA closing fees include a similar range of fees as other loans, VA financing fees are specific to VA home loans. These are fees that cover the possibility that the loan will not be repaid, ranging from 1.4% to 3.6%.

The amount of the finance charge will depend on two factors:

  1. The amount of your deposit
  2. Whether this is your first VA loan or not

VA loans also have their own assessment fees that are set by region, called VA assessment fees. For example, New York’s fee is $625 for a single-family home or condominium, and high-demand counties in North Carolina have a fee of $800.

Can you incorporate closing costs into a VA loan?

VA financing fees and most other costs can be rolled into the loan. However, you cannot incorporate your down payment into the loan. The down payment reduces the cost of finance charges because it reduces the risk for the VA to lend you the money directly and repay the loan with a lender.

Who Pays the Closing Costs of a VA Loan

Generally, the buyer and the seller determine who pays the closing costs, based on what was agreed upon by both parties when negotiating the purchase of a home.

However, these costs are the responsibility of the seller regardless of:

  • Commission for real estate professionals
  • Brokerage fees
  • Buyer brokerage fees
  • Termite report (unless you are refinancing)

Who is exempt from paying closing costs?

Not all VA loan requirements for closing costs apply to everyone. If you are a veteran considering a VA loan, you may be exempt from paying the finance charge portion of the closing costs if you are:

  • Receive VA compensation for service-related disabilities
  • Eligible to receive VA compensation for service-related disability, but instead receives retirement or active duty compensation
  • A surviving spouse of a Veteran who died while on active duty (or from a service-related disability) and you receive Dependency and Indemnity Award (DIC)
  • A service member with a proposed note or memorandum that you are eligible for compensation due to a pre-release claim (prior to loan closing date)
  • An active duty member who can provide proof of obtaining a Purple Heart (prior to loan closing date)

Point: Veterans or military members who receive VA compensation for a service-related disability should seek reimbursement of their closing costs if they retroactively receive VA compensation for a service-related disability.

How to Reduce VA Closing Costs

You can reduce the amount you spend on VA closing costs in a number of ways, such as:

  • Make a down payment to reduce VA financing fees
  • Request its elimination, if you are eligible
  • Negotiate for the seller to pay most of the closing costs
  • Purchase of discount points to reduce the interest rate of your loan

Keep in mind that each mortgage point costs 1% of your total home loan amount. When deciding whether or not to buy the discount points, consider what else the money is used for. For example, making a 10% down payment reduces the amount you pay for VA finance fees. If you can’t afford a 10% down payment when buying points, it might not be worth buying them. Ask your lender to calculate your monthly mortgage payment with and without discount points. Then you will know which option is best for you.

Related: Today’s VA Mortgage Rates

Compare VA Mortgage Lenders

VA loans are a huge advantage for veterans, military members and their spouses when buying a home. But as with any home purchase, it’s always a good idea to compare VA loan options with different lenders to find the right loan for you.

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