Borrowers who have served in the military are eligible for VA loans.
One significant benefit of a VA loan is that you can purchase a home without making a down payment. Despite this, there is no guarantee that you will be able to close the transaction if you have no cash in the bank.
Your ability to cover the costs incurred during the closing process is essential for every VA home loan. The application for a VA home loan must be processed and approved, and this process requires information and services from more than just your VA lender. And if you aren’t careful, you’ll spend more money than you have.
If you didn’t already know, closing costs can be quite expensive. But is it possible to roll those costs in your monthly mortgage payments?
Can Closing Costs Be Included In A VA Loan?
Yes, you may be able to roll your closing costs into your VA loan. However, you will only be able to do this for a particular portion of it.
It’s possible that you won’t have enough money to cover the costs associated with closing. No need to worry quite yet! You can incorporate a portion of the closing costs into the overall amount of the loan if you obtain a VA loan.
The most important thing is that you have the option to include the funding fee in the overall cost of the mortgage. Even though you’ll have to pay more in interest, doing so could get you into a home sooner than later.
The VA Funding Fee
The VA Funding Fee, on the other hand, is the only one of your closing costs that can be rolled over onto your loan. The VA funding fee may be financed into the total cost of the loan rather than being paid for separately.
In the case of a VA-backed or VA direct home loan, the Veteran, service member, or survivor is responsible for making a one-time payment known as the VA funding fee. Since the VA home loan program does not require monthly mortgage insurance or down payments, this fee helps lower the overall cost of the loan for U.S. taxpayers.
Veterans can pay this fee in cash at closing; however, the vast majority opt to finance the fee, which effectively distributes the cost over the loan term.
Fees That Cannot Be Included
Including the additional fees that make up your closing costs in the loan is impossible. Buyers who have a VA loan cannot simply add their additional closing costs and fees to their loan balance. However, they can include them in the offer and have the seller pay for them when the deal is finalized.
For instance, if the home you want to buy is $180,000 and you anticipate paying about $6,000 in closing costs, you could offer the seller $186,000 and request that they cover your costs and fees.
If the home is worth what it’s worth in the market, you might be able to get out of having to bring cash to the closing table to cover your costs and fees. The disadvantage of taking this route is that it will require you to take out a larger loan and pay a higher total amount of interest throughout the loan.
You can roll the VA funding fee into your mortgage loan, which is part of the closing costs. However, other aspects of the closing costs cannot be rolled into the mortgage loan.