January 8th, 2018 10:31 AM by Bob Rutledge
The VA mortgage program does not have a required minimum down payment, it is a 100% mortgage. But, there are closing costs involved in the VA mortgage as there is in all mortgage. WHO pays for closing costs is much different with the VA mortgage than it is with any other mortgage program, another benefit to the veteran borrower.
A common way to remember
which costs a veteran is allowed to pay for is to remember the acronym ACTORS.
That stands for:
are common charges found on most every VA mortgage and while they can vary a
bit by amount; these fees are the ones that can be paid for by the veteran. But
what about these charges?
fees, and others, are example of charges that the veteran is not allowed to
pay. Even though the VA lender requires a processing and an underwriting fee in
order to approve the VA loan, the veteran may not pay for these charges and any
other fee deemed "non-allowable." So if the veteran can't pay them,
closing costs can be paid by the seller of the property and is typically the
initial method of dealing with such charges. As part of a sales contract, the
buyer can say, "We'll pay you $200,000 for this home as long as you pay
for $3,000 in closing costs."
for a buyer's closing costs is considered a seller concession, and is limited
to four percent of the sales price of the home. If a home sells for $200,000,
then the seller can only pay $8,000 of the buyer's costs.
concessions can be used to pay for the buyer's VA funding fee, loan costs,
property taxes and insurance among others.
real estate agent representing the buyer can contribute toward closing costs in
the form of a credit at the closing table. Real estate agent commissions are paid
for by the seller of the property and typically represented as a percentage of
the sales price.
a real estate agent brings a buyer to a seller and there are two agents, the
listing agent and the selling agent, the commission is typically split between
both agents. If the sales commission is six percent, each agent gets three
percent each for their services. Some states don't allow the practice of an
agent contributing toward a buyer's closing costs so check to see if it's okay
in your area.
lender can offset part or all closing costs with a lender credit. Lenders can
offer a credit to a borrower by adjusting the borrower's interest rate. It's
like paying a point to get a lower interest rate but in reverse.
example, a VA borrower applies for a 30 year fixed rate VA mortgage and is
offered a 3.75 percent rate. The lender offers the buyer a lower rate if the
buyer pays one point, or one percent of the loan amount. The choice is 3.75
with no points or 3.50 with one point.
the other direction, the lender can offer 3.75 percent with no points and 4.00
percent with one point credit to the borrower. On a $200,000 loan, the lender
can increase an interest rate by about one-quarter of one percent and the
borrower gets a $2,000 credit toward closing fees.
seller can pay, an agent can pay, the lender can pay but the borrower also has
one more way to pay non-allowable closing costs. Recall that an origination fee
is an allowable charge.
lieu of charging the borrower non-allowed fees, the lender can charge a one
percent origination fee instead of itemized non-allowable charges for things
such as attorney or underwriting charges.
costs on VA loans are indeed a different breed compared to FHA or conventional
loans, especially with regard to who is responsible for any particular fee. If
there are any questions about who pays for what, those questions should be
asked directly to your loan officer. VA costs can be confusing, there's no need
for them to be.
If you have questions go to www.bobrutledge.com and learn more or call Bob Rutledge with USA Mortgage directly at 314-628-2218.