Many Utah home buyers face numerous closing costs. Taking out a VA loan, or a mortgage backed by the U.S. Department of Veterans Affairs, is one way to minimize the amount you’ll have to pay.
The VA home loan program is designed to provide veterans, active-duty service members and surviving spouses with a more affordable path to homeownership. As such, the VA curbs the costs borrowers have to pay at closing – and certain expenses fall into the category of non-allowable fees.
If you plan to buy a home using a Utah VA loan, an experienced mortgage broker can tell you what to expect in terms of closing costs. But for the basics, take a look at the following guide.
Fee Limits for Mortgage Lenders
Mortgage lenders charge an origination fee to cover the costs of processing a home loan. However, the VA places a limit on this fee – the amount a borrower pays must be no more than 1 percent of the total loan amount. With a $300,000 mortgage, for example, the origination fee would be a maximum of $3,000.
Allowable Charges & Closing Costs
In addition to the mortgage origination fee, home buyers who take advantage of the VA loan program may run into other closing costs. Some of the allowable fees for borrowers include:
- VA funding fee
- VA appraisal fee
- Credit report fee
- Title insurance
- Recording fee
- Survey fee
Mortgage discount points are available with VA home loans. Buying discount points is like dialing down the interest rate on a mortgage, which results in a lower monthly payment. This is obviously beneficial, but borrowers who opt for mortgage discount points are expected to cover the costs of at closing.
Non-Allowable Fees on VA Loan
The VA has a long list of non-allowable fees or costs that mortgage lenders cannot charge borrowers. Utah home buyers who take out VA loans don’t need to worry about paying any of the following:
- Real estate attorney fees
- Realtor® and real estate broker fees
- Loan application fee
- Escrow fees or notary charges
- Pre-payment penalty fees
- Lender document fees
- Interest rate lock fee
- Appraisals requested by the lender
- Tax service fees
- Transaction coordinator fees
Those aren’t all of the non-allowable fees included in the VA home loan program. For a complete list, borrowers can check with the VA or talk to an experienced Utah mortgage broker.
Should You Consider a VA Loan?
The fact that VA home loans limit closing costs is a definite advantage – and it isn’t the only one. The many benefits of buying a home through the VA loan program include no down payment, no private mortgage insurance and competitively low interest rates. So, it should come as no surprise to learn that this type of mortgage is the best option for many Utah home buyers.
However, no mortgage solution is right for everyone. You’ll need to explore all of your financing options to determine if you should use your VA home loan benefit – and the professional team at Intercap Lending, a leading Utah mortgage broker, is ready to help. For more information on closing costs and how VA loans compare to other types of mortgages, contact us today.