June 10th, 2019 11:52 AM by Jackie A. Graves, President
VA loans were part of the original Servicemen’s Readjustment Act
of 1944, more commonly referred to as the G.I. Bill. In this act were various
entitlements provided soldiers returning from WWII designed to help them more
easily assimilate back into civilian life. Funds for college and job training
was available as well as the new loan program to help buy a home.
Today, for those who are eligible, the VA loan is the best
option for those seeking to buy a home with as little cash as possible. The VA
loan does not need a down payment but at the same time limits the types of
closing costs the veteran is allowed to pay. No down payment and reduced
closing costs make for a powerful combination.
Your loan officer will provide a list of expected closing costs
you’ll see at the settlement table. These costs are close estimates with little
to no variance allowed. For services which the borrower can choose the provider
independently there are no restrictions on how much the initial estimate varies
from the final settlement statement. Which closing costs the veteran can’t pay
There can be many but it’s probably easier to identify the ones
the borrower is allowed to pay. Any other charge must be paid for by someone
else such as the sellers in the form of a seller contribution or even the
mortgage company by issuing a lender credit.
The veteran can pay for an appraisal, credit, title insurance
and title-related charges, origination charges, recording and a survey where
needed. Many loan officers use the acronym ACTORS to remember which fees are
allowed to be paid for by the sellers.
Sometimes there can be an issue where the lender wants another
appraisal completed beyond the initial one. The veteran is allowed to pay for
the extra appraisal as well. Common fees the veteran can’t pay for might be an
escrow fee or an attorney charge or document preparation. Again, your loan officer
will provide this list.
Still, that leaves the third party fees the veteran isn’t
allowed to pay for. Who pays those? The seller can contribute as much as 4.0
percent of the sales price to go toward buyer closing costs, which should more
than cover what’s left over. The lender can also contribute by adjusting the
interest rate on the loan slightly higher and then provide a credit at the
closing table. Or, a combination of both. The better option is to have the
seller pay the necessary charges in lieu of taking a higher rate. But that’s
completely between you, your agent and the seller’s agent.
All mortgage loans, VA included, come with needed closing costs.
There are multiple third party services and documents needed to close a
mortgage. The difference is who’s going to pay for them. Veterans are
restricted from paying certain types of closing costs, but without the
additional third party services needed, the loan won’t be able to be approved.
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