One of the great features of VA loans is that often little or no cash is required at closing. Rolling in fees on VA purchase and refinance loans can help reduce the amount of cash a military family needs to bring to the closing table.
VA home loan guidelines limit the amount of fees that VA-eligible borrowers can pay when they obtain a VA loan. VA-approved lenders have to follow these limits. Fees which the VA considers reasonable include:
- VA funding fee
- Itemized closing fees allowed by VA
- A 1% flat charge by the lender (origination fee)
- 1 or 2 discount points
Most VA loans require a VA funding fee which runs between .5 and 3.3% depending on the borrower. Disabled vets and surviving spouses are usually exempt. For all types of VA loans, the VA funding fee can be rolled in.
When using the VA Streamline (Interest Rate Reduction Refinancing Loan) program to refinance an existing VA loan, a borrower may roll in all closing costs, including up to two discount points.
For VA refinance loans, including regular and cash-out, all costs may be included in the loan as long as the total loan does not exceed the appraised value of the property.
VA purchase home loans require cash payment of all closing costs except the VA funding fee, which can be rolled into the loan as mentioned earlier. Allowable fees such as title search and recording fees, hazard insurance premiums and prepaid taxes will have to be paid in cash by the borrower or a third party. It’s possible to write into a purchase agreement that the seller pay all closing costs.
For more info on rolling in fees on VA loans, contact an experienced lender.