Written by Isaac F. Davis

VA-eligible borrowers may wonder if fees will be charged with their VA home loans and how much cash they should bring to closing.  There are fees associated with all mortgages, and VA home loans are no exception.  VA borrowers should anticipate paying the following fees at closing:

• - VA required funding fee
• - Fee for credit report
• - Appraisal fee
• - Compliance inspection
• - Origination fee of 1% and/or one or more rate-reduction points
• - Pre-payment on property taxes
• - Property assessments and homeowners insurance
• - Hazard insurance
• - Flood zone insurance (if applicable)
• - Land survey
• - Title clearance and insurance
• - Recording fee
• - Mailing and/or wire fees

 
Most of the fees associated with VA mortgages can be rolled into the loan as long as the total amount does not exceed the conforming loan limit for the county in which the VA home loan is made.   The seller is permitted to pay buyer’s closing costs as long as they do not exceed four percent of the total purchase price. 

VA-approved lenders are required by law to charge most VA borrowers a VA funding fee.  The fee can run from one-half of a percentage to three and one-third percent contingent upon the VA borrower’s circumstances and the kind of VA home loan being sought.  Some VA borrowers are exempt from paying the VA funding fee — disabled veterans and certain surviving spouses, for example.

In addition to the VA funding fee, there are other fees that will need to be paid by VA borrowers at closing time.  A credit report fee, an appraisal fee, and a compliance inspection fee are all charged to VA borrowers as well as conventional borrowers at mortgage closings. 

Also very common by way of fees, is the lender origination fee.  For VA loans, lenders may charge up to one percent in origination fees. Another lender fee may include rate reduction points.  A borrower can lower his or her rate below prime by paying what’s call a point.  The fee is essentially $1,000 for each percentage point. Limits do exist on origination and point reduction fees for VA home loans by state.  Basically, the sum of the origination and rate reduction fees combined with other fees cannot exceed the state limit. Therefore, it is not uncommon for a lender to charge no origination or point reduction fees at a VA home loan closing.

Other common fees to expect at a VA loan closing are put into escrow to cover the first year’s expenses.  Fees for property taxes and insurance are included in this category. It is extremely common for all of these to be included in the monthly mortgage payment.

Additionally, hazard and flood insurance may appear in the monthly mortgage payment.  Hazard insurance is considered optional.  But, flood insurance is required if a property financed with a VA loan is found to be in a known flood zone.

Another fee that is sometimes charge at a VA loan closing is a land survey fee.  Sometimes it is necessary to order a land survey if the property lines are not clearly defined.  In which case, land survey charges will appear in the VA mortgage closing costs.

There are three fees associated with the title company that a VA borrower will most likely see at closing.  Title examination and insurance, recording fee and mailing/wire fees appear in most VA mortgage closings.  A title company will need to verify that a deed is free and clear of liens.  And, title insurance protects the borrower from any liability for liens found after closing.  The title company will have to provide the county with the name change on a real estate deed, and a small fee is associated with this.  Finally, a mail or wire fee is charged when the final payout is made on the loan. 

In conclusion, the fees VA borrowers see at closing are similar to those of other types of mortgage loans.  For information about the fees associated with VA loans, contact a VA loan professional.