Reviewing Grand Junction VA Loan Costs and closing fees
VA home loans require zero down payment which significantly reduces out-of-pocket expenses. Mesa County qualified VA buyers can purchase a home costing up to $484,350 without a down payment. VA jumbo loans above that amount are available, but require a down payment based on a formula. It is best to talk to a lender about this.
Owning your own home is an important part of life. As an active duty service member or veteran, it's even easier for you than for the average person, because of one of your most valuable benefits, the VA home loan offers:
- No down payment
- Zero monthly mortgage insurance
- 15, 25 or 30 year loan terms
- Up to 4% seller-paid closing costs allowed
- More lenient credit guidelines
- Finance up to $6000 in energy efficient improvements
A down payment is not required on VA loans, but the veteran is responsible for paying closing costs. The veteran can pay the closing costs out-of-pocket, or receive seller and/or lender credits to cover them. An estimate on what you can expect is 1% -3% of the loan amount on a larger home purchase price and 3% - 5% of the loan amount for a less expensive home.
The seller is allowed to pay all of the veteran's closing costs, up to 4% of the home price. So, it is possible to avoid paying anything to buy a home.
Tip: If you are short on available funds for closing let, let your real estate agent know that you will be purchasing your home with a VA loan. Your agent may be able to ask that if the seller will pay for some or all of your closing costs.
Here are some definitions and rough estimates of closing costs amounts for a Va loan. The types of fees and amounts vary by geographic location, your actual scenario might look different. The best way to get a better estimate is to talk to a loan professional about your situation. The VA limits the amount of fees the lender can charge.
Grand Junction VA Loan Closing Cost Examples:
VA Upfront Funding Fee - This fee goes directly to the Veteran's Administration to defray the costs of the VA program. This is not a fee that is generally paid for in cash at closing, because VA homebuyers usually opt to finance it into their loan amount. In that case, it does not increase out-of-pocket expense for the veteran.
1% Origination Fee - The VA caps the lender's compensation on VA loans to 1% of the loan amount. This fee is meant to compensate the lender in full. Fees for items such as processing and underwriting may not be charged if this 1% fee is charged to the veteran.
Discount Points - Discount points can be paid by the veteran, provided the fee goes directly to reducing the interest rate. Discount points are separate from the origination fee, because this money is used to buy a lower interest rate rather than to compensate the lender.
Third Party Fees - Companies (other than the lender) that are involved in the transaction are called third parties, such as title companies, credit reporting agencies, and appraisers. Here are common fees and estimated amounts.
Appraisal $500 - The lender will order an appraisal straight from the VA website. VA will then select an approved VA appraiser. The VA appraiser will determine the value of the home as well as ensure it meets minimum property requirements.
Tite Report/Title Insurance Policy $400-$2000 - This fee varies greatly because it is based on the purchase price of the home, the loan amount, and geographic location. There are generally two type of title fees: 1) the lender's title policy protects the lender, and 2) the owner's policy which protects the future owner. Typically in Mesa County the seller pays the owner policy and the buyer pays for the lender policy.
Recording Fee $20-$100 - This fee is set by the county or jurisdiction where the home is located. "Recording"means that the sale becomes public record so that the county knows who is responsible to pay taxes on the home, which banks have loans out on the home, etc.
Credit Report Fee $35 - This is a fee that is charged by a credit reporting agency. The lender must pull a credit report to determine your past credit history. The report usually shows three credit scores from the major credit bureaus, Experian, Equifax, and Transunion and the middle score is used for qualification purposes.
Flood Certification $20 - The lender will pull a flood certification, or "flood cert", on the property to determine whether it's in a flood zone. Most properties are not in a flood zone, but if yours is, you will need to purchase flood insurance (or cancel the contract to buy the property).
Survey Fee / ILC Fee $400 - A company will survey the property to determine where all the physical boundaries are on the property and note fence lines, sheds, out buildings etc.
Prepaid Items - Prepaid items are those which the buyer pays in advance. Lenders require insurance policies and taxes to be paid at the closing. Unpaid taxes and insurance can lead to the home being seized by the government or destroyed by fire without compensation, both of which are risk for the lending bank and you.
Flood Insurance - This is an ongoing insurance policy, paid every year that you live in a home that is in a flood zone. The lender requires the home to be insured against flooding, which is not covered by the standard homeowner's insurance policy. You will pay the first year premium at closing.
Homeowner's Insurance - This is the standard insurance policy that protects against wind and storm damage, fallen trees, and other claims and damage to home except flooding and earthquake.
Escrow Deposit/Tax and Insurance Reserves $300-$2000 - This fee varies greatly because it is determined by 1) the taxes and insurance on the home; 2) the time of year the property closes, and 3) when taxes are collected in the property's jurisdiction. These funds are required to pay these funds in advance of their due date and to be in the lender's escrow account.
Fees Not Allowed to be Charged to the Veteran
Title Company Closing Cost Fee
Closing Protection Letter (CPL)
Document Preparation Fee
Underwriting Fee/Processing Fee
Courier Fee/Postage Fees
Tax Service Fee
Mortgage Broker Fee
Wondering how you can obtain more information about Grand Junction VA loans? Please give me a call at (970) 261-1686 and I can put you in contact with several VA Approved Lenders who can provide you with qualifying information, fees and current interest rates.
Please be sure to read my other article on how to apply for a VA home loan and what to look for on the condition of a home to pass a VA Inspection.