Minimizing VA Closing Costs

It is important to understand how to minimize VA closing costs if you are a military member trying to decide on the amount of your mortgage. If you build the closing costs into your purchase price, you can have the seller pay them for you. The VA stipulates that you can only pay a maximum of one percent for a fee charged by the lender to originate your loan, plus any discount points that are typical and within reason.

How to Have Minimal VA Closing Costs

In order to reduce your closing costs, you can amend your mortgage contract so that the seller pays these costs. You will need to increase your home’s purchase price by the amount of the closing costs. Then, you will need a written agreement with the seller that they will pay these fees and any prepaid costs out of the excess proceeds. The subject property must appraise for the new established sales price.

Your local VA office will establish limits on all required fees and charges. Anything that is outside of their restrictions are to be paid by the seller. These fees and charges include:

  • Appraisals and Inspections - You can pay the fee for a VA Appraiser or VA compliance inspection, as well as a second appraisal if one is required by the VA to determine the valuation. You will not pay a second appraisal fee if your lender or the seller is requesting one.

  • Loan Recording Fees - You can pay any loan recording fees and taxes or any other costs associated with recording the loan. Your state, county and city will have specific fees.

  • Credit Checks - You can pay for the credit bureau reports used by your lender.

  • Prepaids - You can pay the taxes, assessments, and other items the borrower is responsible for in the current tax year, as well as the initial deposit for the taxes and insurance account.

  • Hazard Insurance - You can pay the hazard insurance premium and for any necessary flood insurance.

  • Flood Zone - You can pay the flood zone report cost, if the inspector is independent and will guarantee the flood zone determination is accurate.

  • Property Survey - You can pay for a survey, if one is needed on the property by your lender.

  • Title Examination and Insurance - You can pay the title examination and title insurance fees if they are required by your lender as well as an environmental protection lien endorsement to your title policy, if needed.

  • Courier or Messenger Fees - You can pay any required expedited mail service cost.

  • VA Funding Fee - You must pay the VA funding fee if you are not exempt from the 10 percent minimum disability from the VA.

  • Other Authorized Fees - You can pay any other fee, as required by local codes.