When shopping lenders or loan institutions its important to pay attention to loan fees, not just the rates. Some are built into the loan some are out of pocket. Most of the time your closing costs consist of your loan costs. Loan fees consist of title and escrow (when allowed) flood certificate fee, underwriting fee, commitment fee, application fee, rate lock extensions, recording fee, city/county stamps and a variety of others. There could be more or less depending on your situation. Here are the big cost items.
Loan Origination Charge
Underwriting, processing document preparation and funding fees may all be lumped into one charge called an origination fee. This is usually a percentage (1-3%) of your loan amount. Some like my local lender charge a flat fee under $1000.
Rate Lock Fees
Rate lock fees are typically .25-.1% to lock the interest rates once you are under contract to prevent market fluctuations and unexpected higher costs as you reprocess your home loan. They do expire after a certain amount of time thus why an experienced VA lender is important.
The interest charged on a home loan over time. Most rates for VA are on par with each other across the board and if not lenders often can match anther lender. However, you have to be careful of lenders matching or showing a really good interest rate as they can sneak in buy down costs into your overall closing costs. VA loans typically have the lowest interest rates of all loan types.
Discount Points or Buy Down Rate
A point means 1% of the purchase price. This is a cost to you out of pocket or often built into the loan to buy down the rate. It’s a one time fee out of pocket o a closing cost. Depending on your situation you may want to or may not want to pay this. Again this is often what makes rate look so low in bold writing and in fine print they disclose a buy down rate. Be careful of low-interest rates shown or expressed masked by other fees. Some places force a buy down rate.
VA Funding Fee
If you have any service connected disability this is waived. If you have a down payment the fee is reduced. No down payment your first use is 2.3% of the purchase price second use is 3.6%.
Out of Pocket Costs
(Typical for JBLM Area)
Even though the VA has a 0% down payment, there are some out of pocket costs you need to prepare for. Contact us for specifics and details.
Usually, this amounts to 1% of the purchase price. (example: $300, 000 = $3,000 out of pocket). It is a good faith estimate expected from you per the contract and specific guidelines. This cost is due within 2 days of the contract. It could be a longer duration when taking builders, banks, and outside MLS forms into consideration. Keep in mind that you will get this money back at the end of the process or a credit.
You will have various inspections based on the home. Having a certified home inspector will vary but range about $400 +/- for average size houses around JBLM. The cost can be based on sq. footage so condos tend to be less. Pre inspections range from $200-$300. Typically, inspections take 3-10 days to complete, and it will result in a thorough report of the home. Other inspections may be needed or required but less often such as a sewer scope, contractor bids, area costs, and other investigative costs.
The cost range for this is about $150-200. This is important to make sure the sewer design is up to date or needs to be replaced, which could cost up to $20k.
This fee can be between $800-$1,100. There are some lenders who will implement this cost right into the loan so it will not be an additional out of pocket cost to you.
Closing costs consist of about 2.25-3% of the purchase price. This will be a higher cost and utterly dependent on you to cover. There are ways to negotiate this cost to be paid direct or indirect. Closing cost consists of loan origination fees and or lender fees, taxes, prorations, HOAs, title and escrow and various others. Local lenders typically have a lower fee so closing costs often are lower.
Even though the VA is a 0 down you may still want to put money down to lower not only your payments but your interest rates as well. Conventional and FHA require typically 3-20% depending on the option you choose.