Knowing what it takes to close the deal and cover the costs
There's a lot more to closing your real estate deal than signing on the dotted line.
In addition to the price of the home, there is the price of the deal. These are often called the "closing costs" of your transaction and they cover many things.
Closing costs and pre-paid expenses can vary widely; 3% - 5% is the range for most places. You can get a more specific estimate by asking your lender for a Good Faith Estimate for any particular property.
Many veterans think their VA home loan will cover their closing costs. Well, not technically...but there are ways your VA Mortgage contract can be structured to achieve that same effect: minimal to no closing costs with your VA home loan.
Here's one handy tip.
Your VA home loan amount will cover the home's purchase price or appraised value, whichever is less (plus the VA Funding Fee). So if you want your closing costs covered by the loan, you need to increase the home price and stipulate in the contract that the seller will pay all closing costs and pre-paid expenses in an amount equal to the increased home price. It's all legitimate - as long as the home appraises for the increased price, your closing costs are paid as part of the deal.
How about those itemized costs for the closing - what might those include?
You'll need a VA Appraiser and VA compliance inspectors; and you many want a second appraisal if you're negotiating the price of the home
Government recording fees, recording taxes or other charges for making your contract a legal record
You pay for the credit report obtained by the lender.
You might be paying a portion of taxes, assessments, and similar items for the current year chargeable to you, and the initial deposit for the tax and insurance account.
You'll need to prepay hazard insurance premium, including flood insurance, if required
Is your new home in a flood zone? This report will tell you what to expect, and that could affect your insurance rates
A survey is often required by the lender.
A fee for title examination and title insurance, if any.
For refinancing loans only, you may pay Express Mail or similar special mailing and service charges
Each veteran must pay a Funding Fee to VA.
Additional fees that comply with local laws may be chargeable only if authorized by VA, only if normally paid by the borrower, and if the VA considers them to be reasonable and customary. So no unnoticed charges will slip by.
