Are you going to buy a home using your VA loan benefit but aren’t sure what you’ll need to pay in closing costs? In this episode of Hella Smart, I’m going to break down the fees you’ll need to pay as part of your home purchase. We’ll discover why it’s a hella smart move to find out what your fees are going to be before you go home shopping using your VA loan benefit.
Before You Begin Your Search
When you’re buying a home with your VA loan benefit, the loan itself is not free. Because there are costs associated with getting your home, you’ll want to know what these fees are going to be. This way, you can be best prepared ahead of time as a homebuyer.
The only upfront cost you may need to pay before you find a home to buy is your credit report. This is an outside hard cost that the lender has to pay. Other than that, you shouldn’t be paying anything out of pocket before you find a home.
Additionally, you also want to make sure that you’re fully pre-approved and know who your lender is going to be. This is important because when you find the right home for you, that’s the last thing you need to worry about.
The VA Home Loan Appraisal
Once you find the home you want to buy and your offer is accepted by the seller, you then need to start the process of getting your loan fully approved. The first out-of-pocket cost you’ll usually pay at that point is the VA home loan appraisal.
The VA sends an independent third party out to the home you want to buy to inspect it. This will ensure that it’s not overvalued for the home market you’re buying in. This involves an upfront cost that you may need to pay as part of the loan.
You can find the cost that the VA sets for the appraiser for your county and your state by clicking here.
The next upfront cost when using your VA loan benefit is the VA wood-destroying insect and infestation inspection. This involves a local inspector going to the home and finding out if there is any kind of infestation or infection in the property that’s causing damage to the property.
They’ll also check to see if there is existing damage that’s been caused by some type of insects or infestation in the past. Your VA loan underwriter will see this report and let you know what repairs—if any—need to be made before using your VA loan benefit.
Lender Fees And Loan Requirements
The next set of fees you may need to pay is what’s called lender fees. These are are fees that you pay directly to the loan officer’s company. Those can be things like loan origination fees, loan underwriting fees, possibly loan processing fees, and anything else a lender may charge you.
Again, this is the money going to the lender that they may charge for your loan. You’ll want to talk to your loan officer to find out what fees their company charges. The next set of fees are required for your loan but are not paid to the lender; rather, they’re paid to an outside party.
These fees can be things like the VA appraisal, loan processing, Homeowner’s Association fees, tax certification fees, credit reports, flood cert checks (to see if your home is in a flood area), and more. Each of these costs is required as part of your loan, but they’re paid to a party other than the lender. Again, check with your loan officer to see which ones apply in your case.
Insurance, Taxes, And More
The next set of fees is required for your loan, though you get to pick who’s going to provide them. These are things like lender’s title insurance and owner’s title insurance, which protect your interest in the case of a property title dispute. You may also possibly need to pay closing attorney fees if you’re in one of the states that require it.
Other costs include notary public fees to notarize your documents and doc preps. Again, you get to pick who’s going to provide these services, although they are required by the lender. The next set of fees is government fees that are paid as part of buying a home. These would apply even if you’re buying a home without a home loan and includes things like county and city transfer taxes, property taxes that are still due for the property, or property taxes that may have already been paid for this part of the year by the current owner.
Additionally, you may need to pay things like sewer transfer lateral fees, school assessments, park assessments, and anything that’s paid to the city, county, and sometimes state in the area where you’re going to buy. Check with your loan officer and either your escrow officer or closing attorney, depending on your state, to check on what kind of fees you’ll need to pay.
The next set of fees and costs are what are called prepaid expenses. These are actually costs that are you pay as part of owning the home which your lender may need you to pay ahead of time. Usually, you’re paying one year of homeowner’s insurance to protect both you and the lender’s interest, if anything were to happen to the home that the first year.
You’ll also probably be paying into what’s called an impound account. That’s where you’re pre-paying a certain amount of your property tax and your homeowner’s insurance. This is so that, when the next bill is due, that impound account has enough money to pay your bills.
The last group of fees you may need to pay are things that may be specific for the area or the home that you’re buying. This includes things like Homeowner’s Association fees, Mello Roos fees in some areas, and home warranties. If you’re buying something like that, you again want to check with your loan officer and your real estate agent to find out which of these fees you’ll be paying as part of your closing with a VA home loan.
Getting Into Your Dream Home
I hope this video helps you understand which fees or closing costs you may need to pay when you’re using your VA home loan benefit. If you’re buying a home and you want to be hella prepared to use your VA home loan benefit, feel free to reach out to me and I’ll be happy to help.
You can also subscribe to my channel so you never miss an episode of Hella Smart, my show all about mortgages and real estate. Stay tuned to see what I feature next!