What Are The Va Non
The VA places limits on VA loan fees to help keep homeownership affordable for eligible borrowers. There are also several VA non-allowable fees, meaning the VA doesnt allow lenders to charge you many of the costs that are common with conventional loans.
Heres a list of the VA fees a borrower cannot pay outside of the 1% origination fee:
- Application fees
- Home appraisals ordered by the lender
- Home inspections ordered by the lender
- Document preparation fees
- Settlement fees
Every State Is Different
Unfortunately, there is not one universal dollar amount that will hold true for every transaction, in every state. I do most of my business in Texas, which is one of the most heavily concentrated veteran states, and the non-allowable costs do not run over $300..Usually about $275.
Some states have different costs than others. For example, a termite inspection is not required in all areas of the US, but the federal regulations apply to all states. My Texas clients are not allowed to pay an escrow fee , Tax certificates , courier fees , or Termite inspection . If the house is in a mandatory home owners association, there can be fees to transfer. These fees are also non allowables, usually about $100 or so depending on the association.
Title Examination And Insurance Fees
Title examination and insurance sound the same, but they are two separate things. It is very important to make sure the title history of your new home is clean. The lender will hire a title company to trace the chain of ownership of the house back through history. The title company looks for any illegal transfers of ownership in the past that could affect you in the future. If it turns out that there was an illegal transfer, someone could have rights to your home down the line! They also determine that there are no other liens on the house. This is for your protection. If there is an old lien on the house, you could be liable for it after you take possession.
Once the title company finishes their work, insurance is needed against any errors or oversights that could have happened during the examination. Each party needs separate insurance the lender and the borrower. You are not always responsible for the cost of both title insurance policies. Sometimes the seller will pay the lenders policy and the buyer will pay for their own policy. Its important to put the details into your purchase and sale agreement about who is going to pay what with regards to Title Insurance. The costs vary depending on the work involved, but you can expect the total to be about 0.5% of the loan amount.
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Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS # Loading Reviews
- ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In , closed 0 VA Purchase Loans, which was 9% of all VA Purchase Loans closed nationwide last year.
Va Allowable Closing Costs
VA Funding Fee : This is charged by the VA to maintain the VA home loan program. This amount varies according to the eligibility status of the Veteran, the percentage of the down payment or equity and any previous use of the VA Entitlement. The amount required for Funding Fee can be found here
Origination Fee : to cover any lender charges and services, this fee can not exceed 1%
Discount Points : the veteran can choose to buy down the interest rate on the loan using Discount Points
Recording Fee : to record the mortgage and deed with the local county
Prepaid Items : amount needed for escrow and any prorated amount of property taxes or assessments due at closing between buyer and seller
Flood Insurance : if needed
Title Examination/Title Insurance : to insure the title of the property is free of any previous liens
Local Fees : These are fees specific to the local government where the property is located. Pennsylvania has a 1% state transfer tax. In addition, there is also a local transfer tax that can vary by local municipality. Typically the local transfer tax is also 1% but this can also be vary, so make sure to check on this. Philadelphia, Pittsburgh and some other of the larger cities tend to have higher local transfer taxes. This tax is based on the sales price of the transaction and is usually split evenly between buyer and seller.
What Are Va Home Loans
Guaranteed by the U.S. Department of Veteran Affairs, VA mortgage loan program aims to help veterans or their spouses obtain long-term home financing. The program helps the veteran buy a home without having to pay any down payment. Borrowers, however, are required to pay a funding fee at the time of closing that can be financed into the loan.
Va Home Loan Eligibility Criteria
- The applicant must have been discharged honestly from service.
- The individual must have served either 90 days on active duty or 181 days in peacetime.
- Spouse of a veteran who died in the line of duty or due to a service related disability can also be eligible.
- Though not an essential criteria, most lenders look for a credit score of 620 or more.
- The applicants debt-to-income ratio must be 41 percent or less.
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Why Do Owners Reject My Va Loan Offer
The U.S. Department of Veterans Affairs guarantees mortgage loans for eligible current and former military service members. Because the VA guarantees mortgage loans on behalf of eligible borrowers, many lenders offer somewhat more relaxed credit qualification standards to them. Over the decades, VA-guaranteed mortgages have enabled the homeownership dream for millions of eligible military veterans, but VA-guaranteed mortgages can come with potential downsides, such as tougher repair requirements that may turn some home sellers off.
Va Loan Fees The Borrower Cannot Pay
When you go to purchase a home with a VA guaranteed mortgage, youll typically encounter fees like closing costs and other expenses. How those get paid is often a matter of negotiation between you and the seller. But there are also fees the VA does not allow the buyer to pay.
Did you know the lender or seller can’t charge the borrower for attorney’s fees? If the buyer chooses to pay for his or her own attorney, that’s the buyer’s call, but the buyer can’t be charged for the bank’s legal representation.
The VA also prohibits a real estate agent from charging the buyer a commission. You’ll also find VA mortgage rules that close any loopholes that might allow an agent to charge fees appearing to be commissions even if not defined as such. Other costs that the VA prohibits buyers from paying include:
- Notary public fees
- Cost of termite inspection
It is legal for a house hunter to contact and use a “buyer broker” to find a suitable property, but buyers cannot pay brokerage fees and commissions. The VA adds that property availability and purchase price information is widely available. Forbidding a VA mortgage applicant from paying a commission or fee to a buyer broker doesn’t impair the buyer’s ability to find a suitable property.
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Misconceptions About Va Non
There are several misconceptions regarding VA loans in the real estate community one being the issue of non-allowable costs. VA non-allowable costs are costs that the veteran is not allowed to pay. As a real estate broker, I have heard so many false, inaccurate statements about VA non-allowable costs. Many realtors have no idea how much they are, what they are and neither do many lenders. Last year, I had a VA buyer that made an offer on a house that was refused because he was a VA buyer using a VA loan. When I asked why their offer was refused, the sellers agent informed me it was because the non-allowables were $1800. When I laughed and asked where she had heard this, she told me I called and talked to a lender and they said $1800! Obviously this lender shouldnt be in business.
Va Buyer Allowable & Non
As our market tightens up and seller concessions are becoming more difficult to get I am getting many questions about what to ask for when writing a VA loan offer. There are several fees a Veteran is forbidden to pay for in a VA loan financed transaction regardless of their willingness to pay. When writing an offer on a home using VA financing a buyer must ask for at least a minimum amount of concessions to cover the VA Buyers Non-Allowable costs and Fees.
When using the standard C.A.R. form RPA-CA I would suggest the following wording on page 1, line 3D Additional Financing Terms: Seller to pay 3% towards buyers recurring & non-recurring closing costs and VA Buyer Non-Allowable Fees.
The actual percentage you request is negotiable but make sure you have enough to cover all the VA non-allowables.
Here is a summary of allowable and non-allowable costs from The Department of Veteran Affairs.
ALLOWABLE CLOSING COSTS
A Veteran may pay any of the following reasonable closing costs and fees:
For more information about VA Home Loans please contact:
Dean Henderson, CRMS, GRI, CMHS
Certified Military Housing Specialist
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Selling Your Home To A Veteran These Are The Fees You Must Pay
The Department of Veteran Affairs created the VA loan program to help veterans and their families buy homes. One of the advantages for the Veteran is that the VA limits the amount of fees the lender and title company is allowed to charge the buyer. Some of the non-allowable costs are considered junk fees, while others represent actual costs of business for the lender or title company. If you are selling your home to a veteran through a VA loan, you need to be aware of these fees because the lender and title company will usually pass them on to you.
Then Who Pays These Fees
These fees can be paid by paid by any other party, except the Veteran themselves. Typically, anyone of the following parties will end up covering the cost:
- Lender or Broker
- Sellers Agent
- Buyers Agent
Most of the time, you will find that it is usually a combination of two parties above that will contribute to cover these costs. Very rarely would the seller have to pay for all of the VA Non-Allowables. In most cases youll find that sellers usually end up coming up with roughly $500 $1000 in additional costs when accepting an offer from a VA buyer.
From the perspective of a seller, of course you want to maximize the amount of proceeds youll receive from the sale of your house but would you really want to ignore a substantial market of home buyers just to save $500 $1000? Just something to think about.
Myth #: Va Loans Take Forever To Close
VA loans often get a bad reputation for having a long closing period.
Some realtors are hesitant to deal with VA loans because of this misconception…
The truth is that Community Mortgage continues to close loans within 30 days.
This is a typical timeframe for most loans.
Therefore, it’s a stretch to believe that VA loans take much longer than other loans to close.
Like any traditional loan, you can expect to close within 30 days with Community Mortgage.
How Do Sellers Tend To Feel About Va
Up until recently, the VA did not allow its borrowers to pay the majority of closing costs. Although the lack of fees was intended to be another benefit to VA borrowers, the guideline made it more challenging for them to find willing sellers.
Sellers have a few old misconceptions about VA loans that they are burdensome, take longer to close, have more requirements, etc. but for lenders, VA loans are one of the easier loan types, says Viola.
However, as Viola explains, these concerns are not warranted. Your VA-loan clients are now able to pay many of the fees that were once non-allowables as part of their closing costs. Furthermore, in 30 days the same amount of time it typically takes to close a conventional loan a knowledgeable lender can close a VA loan.
According to Kraft, sellers may actually be more apprehensive about the strength of VA-loan buyers. Theres a common misconception that people using a VA loan are less qualified since they dont have a down payment requirement, he says. But VA purchase loans had a higher closing success rate in May and June than both conventional and FHA loans, according to data from mortgage software firm Ellie Mae. Beyond that, VA loans have been the most foreclosure-resistant mortgage product on the market for most of the last decade, according to the Mortgage Bankers Association.
Also Check: Va Manufactured Home Guidelines
Will I Have To Pay The Va Funding Fee
If youre using a VA home loan to buy, build, improve, or repair a home or to refinance a mortgage, youll need to pay the VA funding fee unless you meet certain requirements.
You wont have to pay a VA funding fee if any of the below descriptions is true. Youre:
- Receiving VA compensation for a service-connected disability, or
- Eligible to receive VA compensation for a service-connected disability, but youre receiving retirement or active-duty pay instead, or
- The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you’re receiving Dependency and Indemnity Compensation , or
- A service member with a proposed or memorandum rating, before the loan closing date, saying you’re eligible to get compensation because of a pre-discharge claim, or
- A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart
You may be eligible for a refund of the VA funding fee if you’re later awarded VA compensation for a service-connected disability. The effective date of your VA compensation must be retroactive to before the date of your loan closing.
If you think you’re eligible for a refund, please call your VA regional loan center at . Were here Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.
Title Company Fees Are The Same
As far as the title company fees go, the costs are the same to both buyer and seller whether the buyer is getting a VA, FHA, or traditional mortgage.
Sometimes the VA buyer will increase their purchase offer by the amount of their closing costs. Then the seller will still net the same and the buyer doesnt have to put down as much. One of the challenges with this approach is making sure the home appraises for the higher amount.
The standard Texas contract contains a contingency for a government-backed loan in paragraph 12 regarding the seller paying buyer closing costs. It allows the parties to limit how much of the buyers closing costs the seller will pay.
Some people think that if an amount is given in paragraph 12 of the contract, the lender will ensure they charge at least that much in buyer expenses. It at least gives the lender permission to charge non-allowable fees up to that amount. Again, it depends on the lender.
The opinions expressed are of the individual author for informational purposes only and not for legal advice. Contact an attorney for any particular issue or problem.
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How Much Can You Borrow With A Va Home Loan
For those looking to refinance a home with a VA loan, the limit is 90 percent of the reasonable value of the property. If refinancing an original VA loan, the amount can go up to 100.5 percent of the reasonable value. The one-half of one percent that is tacked on is a fee charged by the VA. Other limits do apply as well. Under normal circumstances, a VA loan in Texas, without a down payment, cannot exceed $424,100. A VA home loan up to $1 million is possible, but the borrower is required to pay 25% of the different between the maximum loan amount in Texas and the sales price as a down payment. So, for example, to purchase a $900,000 home in Texas a borrower would have to pay $118,975 in down payment .
Va Loan Allowable And Non
Why is there a misconception out there that if a seller accepts a VA offer, they will have to pay more in closing costs?
Whether you are the buyer or seller, closing costs are something both sides have to take into consideration. Closing costs are fees associated with procuring and finalizing a home purchase or refinance, and most must be paid before you are able to get the keys to your new home. The VA mortgage program does try to limit the amount of costs that a veteran can pay.
ALLOWABLE VA CLOSING COSTS
Closing costs can come in many different forms. These costs are the actual cost of doing a loan. Prepaid finance charges and paid outside closing costs are also factored in when closing day arrives. PFC costs are directly associated with the loan and can affect your annual percentage rate which in turn reflects the total cost of borrowing.
PFC items can include things such as:
- Points used to buy down an interest rate which is rare when it comes to VA home loans
- HOA fees
- Escrow for prepaid interest, property taxes and homeowners insurance
- VA funding fee, which VA charges and veterans can roll into the loan or ask the seller to pay
POC items are not factored into overall financing, but they still have to be covered. These can include:
- VA appraisal
- Pest inspection fee
- Home inspection if the buyer chooses to get one
Finally there are closing costs that are associated with the loan itself include fees such as:
NON-ALLOWABLE CLOSING COSTS
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