Depending where you live or the type of loan you’re taking out, you may be able to control how many closing costs you’ll have to deal with, how you’ll deal with them, and when. Find out the best way to minimize those closing costs and keep more money in your pocket – even after closing!
What Are VA Streamline Closing Costs?
Closing costs include any fees involved in obtaining and finalizing your streamline loan—basically, how much the whole process costs, from your very first meeting with your lender to the moment you get the keys to your new house.
We’ll take you through some examples of closing costs so you can get a better idea of what to expect. Though this is not a comprehensive list, it covers most of the common fees, many of which may be known by other names.
Prepaid Finance Charges (PFC) vs. Paid Outside Closing (POC)
You may notice in your paperwork that some closing costs are listed under PFC or POC. POC payments are paid prior to closing, like an appraisal fee. PFC charges include any fees or costs having to do with the loan process itself, such as prepaid taxes, prepaid insurance, title searches, or administrative charges.
Discount points serve as fees you can pay to buy-down your mortgage rate. One discount point is equal to 1 percent of the loan amount. Each point used can potentially lower your interest rate by 1/8 to a quarter. For example, if you have a loan of $300,000, each of your discount points would cost $3,000. If your interest rate is 5 percent, and each point used lowers your rate by a quarter amount, then buying two points for $6,000 will lower your interest rate to 4.5%. The cap for discount points is 25, and you can always opt for a zero-point loan.
Origination fees are pretty self-explanatory; they pay for the administrative process of starting a loan, such as underwriting and processing. This fee cannot be more than 1 percent of the loan.
Credit Report Fees
These fees pay for a credit report, which can cost up to $30.
Typically, your lender will hire an appraiser to evaluate the house and the property surrounding it. The appraisal fee can be around $300.
Included in the appraisal process are hazard and flood zone determinations, as well as environmental endorsements. These will cost money, too. Hazard insurance may or may not be required in your state, but some states (like California) require a hazards disclosure report. This report informs the buyer of any potential environmental hazards near the property they are buying.
Like hazard insurance, environmental endorsements may not be required, but certain states or lenders may want to make sure the location of the property has been declared environmentally safe before proceeding with the loan process.
Flood zone determination is usually performed by a third party. They determine whether your home is located near or in a flood zone and whether or not you’ll need to buy flood insurance.
Title Examination Fees
This fee can cost up to $300 and is charged by a third party, usually an attorney in charge of closing. The attorney inspects the title and makes sure there are no mistakes or oversights, such as breaks in the chain of title or unsatisfied liens of mortgages.
Escrow fees are paid to the third party who carried out the closing, such as title companies, attorneys, or escrow companies. Some states don’t require real estate attorneys to be present during closing, but normally some form of third party will oversee the closing and make sure everything is in order.
When you start your escrow account, lenders will require a deposit. Escrow payments can be annual or semiannual, or you can roll them into the loan and pay them in monthly installments.
VA Funding Fee
VA funding fees of 0.5 percent apply to every VA refinance or purchase loan and are intended to help other veterans. The proceeds of this fee go to the Department of Veterans Affairs, and the VA uses this money to compensate for losses on defaulted VA loans. If you are a veteran under VA compensation or if you have disabilities from service, it is possible to be exempt or partially exempt from this funding fee.
If you’ve crunched the numbers and a VA Streamline seems right for you, then we’re here to help. Our loan officers at Low VA Rates are ready and reliable when it comes to setting you up with a great VA loan at an extremely low rate. We work hard with our veterans to mitigate the pile-up of closing costs and make sure no unforeseen fees obscure the path to homeownership. You’ve worked hard for us, so we promise to work hard for you. Visit our site to learn more.