Using A VA Loan For Your First Home Purchase? 3 Things You Need To Know About Closing Costs
If you're in the process of buying your first home using a VA loan, you might not be prepared for the fees. You hear a lot about zero down VA loans, which many take to believe translates to no upfront fees, whatsoever. Unfortunately, that's simply not the case; even with a VA loan, there are going to be some upfront fees that need to be paid. The trick is to understand them before you begin the purchase process. Here are three tips that will help you navigate the closing costs associated with a VA loan.
Understand the Various Closing Costs
When you purchase a home through conventional loans, you'll be responsible for all the closing costs — unless you can get the seller to take on some of them for you. However, it's a little different with a VA loan. With VA loans, the closing costs are divided into two categories; those you do pay and those you can't. Here's an explanation of both.
Those You Pay
When buying a home using a VA loan, you need to look at the closing costs you're responsible for paying. Those are the costs that the VA says you can legally pay for. Those costs include fees for credit reports, origination fees, and appraisal fees.
Those You Can't
In addition to the fees you can legally pay, there are others that the VA says you absolutely can't pay for yourself. Those costs include processing fees, underwriting fees, and escrow fees. Those will require additional avenues for payment.
Secure a Way to Pay Them
As discussed in the previous section, there are fees that you won't be allowed to cover for yourself. However, those fees will still need to be paid before you can purchase your home. For that, you'll need to secure other means of paying them. Here are a couple of effective ways you can get those covered.
Include Them in Purchase Offer
When it comes to covering the costs that you're not allowed to pay cash for, one way to get them covered is to include them in the purchase offer. That allows those fees to be absorbed by the seller, which takes the burden off you. To recoup that lost money, the seller can increase the cost of the home by the amount of the closing costs.
Ask Agent to Cover Them
Another effective way to cover your closing costs is to ask your agent to cover them for you. In certain instances, agents can take the closing costs out of their sales commission.
Be Wary of Unexplained Fees
Finally, if you're going to use your VA loan, be sure to ask for an explanation for every fee you're asked to pay. If there are unexplained fees, hold off on signing the contract until all fees are properly explained to you.
For more information, contact a company like VA Loan Lending.
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