A Veterans Affairs (VA) loan allows you to buy your home with 100% financing or no down payment. However, there still will be other costs associated with the loan. You most likely still will need an earnest money deposit and closing costs to cover. You may be able to get the seller to cover some of the closing costs during settlement, up to 4% for a VA loan. When buying a home using VA financing, closing costs cannot be rolled into the loan. There are some costs that can be financed such as the VA funding fee.
For first-time home buyers, the VA funding fee ranges from 2.15% to 2.4% of the purchase price. If you are receiving any form of disability from Veterans Affairs, then the funding fee may be waived. The funding fee is based on various loan characteristics. On an Interest Rate Reduction Refinance Loan, an appraisal is not required, but the lender may require a drive-by-appraisal. Income documentation is not required, but source of income must be verified. On a purchase loan, the sales price cannot exceed the appraised value.
In general, when buying a home using 100% VA financing, the closing costs can range from 3.5% to 5.5% of the purchase price of the home. Closing cost can range from loan origination fees from the lender, credit report cost, appraisal, recordation cost, title fees, and transfer taxes, to name a few. If the 4% in closing cost assistance from the seller doesn’t cover these costs, then the remaining difference is the responsibility of the buyer. Also note, as a new home owner you will want to have some savings available after settlement in case of an emergency, and to pay for any added expenses once you move in, such as moving and purchasing curtains, lawnmowers, appliances, etc.
If you are ready to purchase a home with your VA benefits, keep in mind that there is a difference between down payment and closing cost.
Enjoy your home search and good luck!
Bruce Dorsey is employed by NFM, Inc. as a Mortgage Loan Originator, NMLS #174898. NFM, Inc. is a Veterans Affairs Automatic Lender (659985-00-00) under the trade name NFM Lending. NFM, Inc. is licensed as: Maryland Mortgage Lender (5330) under the trade name NFM Lending. For NFM lending’s complete licensing information, please go to www.nfmlending.com/licensing. NFM, Inc.’s Nationwide Mortgage Licensing System (NMLS) Company Identifier Number is 2893. NFM, Inc. is not affiliated with, or an agent or division of, a governmental agency or a depository institution. NFM, Inc. is an equal housing lender.