The VA home loan is possibly the best loan. It is available to active military and veterans. Some features are:100% financing and no down is payment required. 30 year fixed interest rate, and interest rates with rates the lowest they have almost 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. There are closing costs involved with buying a house using a VA home loan even though VA loans offer 100% financing. Closing costs are in addition to the down payment and can

range from 2-4% of the purchase price. VA allows the seller to pay up to 4% of the VA buyers closing costs so it is smart to ask the seller to “credit” you at least 3 % of the closing cost to reduce your out of pocket expenditure.

There are 3 major costs that are “upfront”. They are the earnest money deposit, home inspection fee and appraisal fee. When you make an offer to buy a house, it is customary to leave a deposit called a “earnest money deposit”. 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.

Though it is optional to get an inspection on the house with a VA loan, it is highly recommended. The cost is on the buyer and usually run about $300 paid upfront. The inspector will check all aspects of the house, the structure, electrical, plumbing and more, so that you know you are making a sound investment.

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.

Next, you will have to pay for a home inspection. It is optional for a VA buyer to have a home inspection, but highly recommended. The inspector will work for you as an independent 3rd party and inspect all aspects of the house, the structure, electrical, plumbing and more, so that you know you are making a sound investment. Home inspections generally run about $300. This has to be paid up front.

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.

The rest of the costs are paid when you close on the house. The closing costs can be broken into 4 categories; lender fees, title/escrow fees, 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:

Title and Escrow Fees When you “close” your house, it will be handled by an escrow company. They will have a variety of fees to handle closing such as an escrow fee, and notary public fee. These fees will have to be included in the credit that you ask for from the seller and can amount to over $1,000 on average. When you buy a house you will be required to obtain title insurance. There are 2 title policies you must have, an owners and lenders policy. 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. For a $300,000 house the fee will probably be around $400.

There are costs related to the lender fees. There is generally an underwriting fee, processing fee, credit check fee and possibly an origination fee. The seller has to pay the underwriting and processing fee. The origination fee can vary depending on your interest rate. If you want to lock in the lowest interest rate, a lender can charge up to 1% of the loan amount as an origination fee. Additionally, if you want to buy down the interest rate below market, you can pay discount points to get an even lower than market rate.

Reserves Held by the Lender When you obtain a VA home loan the lender will collect a reserve of property taxes and homeowners insurance. Be prepared to pay as much as 9 months of property taxes paid up front at closing because the VA lender sometimes asks for this much in advance. If your property taxes are $250/mo, this means the lender could potentially take a reserve of $2,750. 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. 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.

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.

A requirement from the VA lender is that you to pay an entire 12 months of homeowners insurance policy in advance. All lenders require that you keep a homeowners policy on a property if there is a mortgage on it. This will insure against fire and other disasters that could damage your house. Paying 12 months in homeowners insurance up front can total anywhere from $400 to $1,000 or more. Call your insurance agent for a quote as the cost will depend on where your property is located and the purchase price.

These are the major closing costs associated with buying a home with a VA loan. As mentioned, total closing costs can range from 2-4% of the property purchase price which can be a fairly large number.

In summary, these are the major closing costs associated with buying a home with a VA loan. As mentioned, total closing costs can range from 2-4% of the property purchase price. That can be a fairly large number. So it is very important to either plan to have money set aside for these costs or work with the real estate agent representing you to negotiate with the seller to pay for your closing costs.