Everything You Need to Know About Closing Your VA Loan
You're closing on a VA loan. Congratulations! This post will tell you:
- What’s going to happen at the loan closing meeting
- What closing costs you could have
- What happens after closing
The closing costs section will include two exciting bonus topics about VA refinance loans:
- Closing costs of cash out VA refinance loans
- VA streamline closing costs explained
The Loan Closing Meeting
Where do you attend the loan closing meeting when working with a lender that isn’t located in the same area as you? The answer is that the meeting can happen wherever is convenient for you, including your home. The title company representative and your loan officer will meet with you wherever is convenient for everyone involved.
What actually happens at this meeting? If there are closing costs, you’ll pay those, so bring a checkbook, debit or credit card, or a cashier’s check, depending on what form of payment the title company accepts. Your loan officer will also read your documents to ensure you understand what you’re signing.
You’ll need to bring official cards or documents that identify you—whether a social security card, birth certificate, state-issued identification card, or another type. You can bring whatever you have. Your loan officer should give you a list of whatever else you need to bring.
Make sure to schedule about two hours for the meeting. It may end sooner, but it’s good to be prepared for two hours, just in case there’s a mistake on a document, which may need to be corrected.
There are a few different types of closing costs. Some are constant for all VA loan borrowers, but some are specific to only some situations.
VA Funding Fee
You’ll need to pay a VA funding fee for any type of VA loan you get (with some exceptions). The VA funding fee helps to pay for the cost of the VA loan program.
Other Closing Fees
There are some other fees that VA lenders are allowed to charge on every VA loan:
- VA funding fee
- A 1% loan origination fee
- Closing protection letter (CPL)
- Discount points
- Fraud protection report
- Well and septic inspection fees
- Express mail fees (which should be under $50)
- Environmental protection lien endorsement
- Title fees:
- Title endorsement
- Title examination
- Title insurance
- Title policy
- Title preparation
- Title search
- Appraisal fee
- Credit report
- Recording fees
- Survey and plot plan
- Prorated tax and insurance escrow
This isn’t a list of every possible fee. Your lender may charge you another legal fee that’s just not on this list. This is just an idea of the major types of closing fees.
This second list below is a list of other fees your VA lender might itemize and charge you if they do not charge you a flat 1% origination fee. If they do charge you the origination fee, you won’t see a list of these fees:
- Pest inspection fee
- Copying fee
- Email fee
- Fax fee
- Postage fee
- Tax service fee
- Lender’s appraisal fee
- Underwriting fee
- Processing fee
- Application fee
- Commitment fee
- Trustee fee
This isn’t a list of every single possible fee. There may be other legal fees that your lender can charge you. If you want to be sure about a certain fee, you can check with your state, county, and city governments to find out if it’s required.
Remember, when you’re buying a home, the seller might be able to pay for some of the closing costs for you. If you really need help, it’s worth mentioning to the seller. He or she might want to help you or might really need to move.
Fees VA Borrowers Never Pay
There are a few fees that you are never supposed to pay, according to the VA. These fees include:
- Mortgage broker fee
- Termite or general pest inspection (in most states)
- The real estate agent’s commission
- Prepayment penalties
- Transaction coordinator fees
- Documentation fees
- Notary fees
- A builder’s HUD/FHA inspection fees
- An attorney fee that is charged to the lender
If a lender is charging you for any of these, you might need to investigate whether they have a good reason or if it’s a scam.
One type of voluntary fee is discount points. When you buy discount points, the lender lowers your interest rate, which will save you money over time. For every quarter of a percent you want to lower your interest rate, you’ll pay a discount point of about 1% of your total loan.
Discount points usually become worthwhile if you’re going to live in the home for five years or longer. It’s worth asking your VA lender how many years of mortgage payments it would take to break even on a number of discount points. You could look at a few scenarios.
Closing Costs on a VA Cash Out Refinance Loan
You can get cash back from your home equity during your loan closing if you use a VA cash out refinance loan. The closing costs on a refinance loan are almost the same as the closing costs on a regular VA purchase loan, including:
- Homeowners insurance
- Discount points
- Property taxes
- Prepaid interest
- VA funding fees
- VA appraisal
- Loan origination
- Processing fees
- Title examination
- Homeowners association dues
You can ask to have the VA funding fee (but no other fees) added to the amount of your new VA loan. With a VA cash out refinance loan, your goal is to pull out as much usable cash as possible. Rolling the VA funding fee into the loan helps you keep more cash.
Closing Costs on a VA Streamline (IRRRL) Refinance Loan
Here’s a topic we promised above: the VA streamline closing costs explained. A VA Streamline (IRRRL) Refinance Loan is a fast, easy refinance of a VA loan you already have. You can add all of the closing costs of an IRRRL to the loan value itself. This benefit lets you get better terms and/or interest rates and lower your monthly payments—even if you don’t have the cash to pay for closing costs.
You can even roll two discount points into the balance of an IRRRL. Note that you can also buy more discount points if you want, but you just can’t add them to the IRRRL balance.
There are fewer closing costs associated with a VA Streamline Refinance Loan. You’re not required to get a new VA appraisal. Your lender also won’t re-check your income and employment, so there are no fees for those activities. However, closing costs still include:
- The VA funding fee
- Allowable fees like a flat charge from the lender
- A credit report fee if it’s necessary for the lender’s requirements
- Costs to refinance a past due loan, if applicable:
- Late fees on the old loan
- Reasonable legal fees related to the termination of the old loan
Again, because it’s so important to remember, even these fees can be rolled into the balance of the IRRRL to be paid over time.
After the Loan Closing
What happens after closing on your loan? There are two major events that are most common. First, if you’re due a refund from your escrow account, you can expect information about it within 45 days. Your lender should give you a form that explains when you’ll receive the payments.
The other major event is you may receive a written notice that your loan servicer (the company that collects your monthly payments) is going to be a different company than your lender. The notice will tell you where to send your payments, when your first payment is due, and more.
If you get a new loan servicer, they might contact you for more information to finish the process. You can check with your VA lender to make sure this isn’t a scam. If it’s legitimate, you should respond to the new loan servicer quickly.
If your new loan servicing company causes you some kind of major problem, you can send a Qualified Written Request (QWR) to your servicer explaining your complaint. They should respond to you and fix the problem in 60 days or less. If they don’t, you can send a complaint to the HUD Office of RESPA, explaining the situation.
Even if you have a problem with your new loan servicer, it’s crucial that you keep making your payments on time. If the problem is intolerable, you could look at some other options, but missing payments would put you in danger of foreclosure.
We hope that this information will help you get through the process with confidence. Contact Low VA Rates if you have questions about VA loans.