Can I Include Closing Costs in My VA Loan?
When considering a VA loan, one of the most common questions potential borrowers have is whether they can include closing costs in their loan. The answer to this question can significantly impact the overall cost and feasibility of obtaining a VA loan. In this article, we will explore the ins and outs of including closing costs in a VA loan and provide you with the information you need to make an informed decision.
Understanding VA Loans
Before diving into the specifics of closing costs, it’s essential to have a basic understanding of VA loans. VA loans are government-backed mortgages designed to help eligible veterans, active-duty military personnel, and their surviving spouses purchase homes with little to no down payment. These loans are issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs (VA), making them an attractive option for many borrowers.
Closing Costs in VA Loans
Closing costs refer to the fees and expenses associated with obtaining a mortgage, such as appraisal fees, title insurance, and lender’s fees. These costs can vary significantly depending on the loan amount, location, and lender. While VA loans have specific guidelines regarding closing costs, borrowers often wonder if they can include these expenses in their loan amount.
The VA’s Role in Closing Costs
The VA has specific guidelines regarding closing costs for VA loans. According to these guidelines, certain closing costs can be included in the loan amount, while others must be paid out of pocket. Here’s a breakdown of the types of closing costs that can be included in a VA loan:
- VA Funding Fee: This fee is required for all VA loans and can be included in the loan amount. The funding fee varies depending on the borrower’s military service and whether it’s their first VA loan.
- Origination Fee: Some lenders may charge an origination fee, which can be included in the loan amount.
- Appraisal Fee: The cost of the appraisal required by the VA can be included in the loan amount.
- VA Funding Fee: As mentioned earlier, this fee can be included in the loan amount.
- Private Mortgage Insurance (PMI): VA loans do not require PMI, so this cost is not applicable.
Non-Included Closing Costs
While some closing costs can be included in the loan amount, others must be paid for by the borrower. These include:
- Prepaid Property Taxes and Homeowner’s Insurance: These costs must be paid at closing and cannot be included in the loan amount.
- Attorney’s Fees: If you hire an attorney to review your loan documents, the fees must be paid out of pocket.
- Title Search and Insurance: These costs must be paid at closing and cannot be included in the loan amount.
- Recording Fees: These fees are associated with the recording of the deed and mortgage and must be paid out of pocket.
Conclusion
Understanding whether you can include closing costs in your VA loan is crucial for making an informed decision. While certain costs can be included in the loan amount, others must be paid out of pocket. By familiarizing yourself with the VA’s guidelines and working closely with your lender, you can ensure a smooth and cost-effective VA loan experience.
