No matter what type of mortgage loan you get, you will have to pay fees. Paying fees for a loan increases the cost of buying a house, though, so many people look for ways to cut their closing cost expenses. If you are getting a VA loan, is there a way to save money on your closing costs? You can save money in several ways, and here are a few things you should know if this is your goal.
Understand What a VA Loan Is
Before you can find ways to reduce your mortgage's closing costs, you might want to learn more about VA loans. A VA loan is a unique loan you can get only if you meet the eligibility requirements. The main requirement is that you must prove that you served in the military at some point in your life. To prove this, you must apply for a certificate with the Department of Veteran Affairs. The VA does not issue these loans, but they back them. If you default, your lender can seek compensation from the VA for the money they lost from offering you a loan.
You Can Reduce Closing Costs by Offering a Larger Down Payment
When you take a VA loan, you must pay a fee. The fee is a funding fee, and the money goes to the VA when a lender issues you a mortgage. Every borrower must pay this funding fee when using a VA loan, but the fee rate varies. You pay the highest rate for the funding fee if you offer less than a 5% down payment. If you want to cut the funding fee's costs, you should aim to put 5% down. If you put 10% down, you can save even more. The risks of issuing you a loan decrease when you put more money down. As a result, you pay a lower funding fee rate.
Ask the Seller to Pay Some of Your Closing Costs
The other way you can save money on closing costs is by asking the seller to pay some of them for you. When you write a purchase offer for a house, you can include a contingency that asks the seller to pay some of these fees. If the seller agrees, it decreases the amount you must pay.
If you have questions about qualifying for VA home loans or the fees required, talk to a mortgage lender today.
