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Up-front costs

Up-front costs

When you go to purchase your home, the seller will expect you to deposit “earnest money.” This is viewed as “good faith” money. It tells the seller that you are a serious buyer.

There are no specific goals for how much the earnest money needs to be, but often we see it be about 1% sales price.

You will typically get your earnest money back at closing. This can be applied towards closing costs or other loan fees. If for some reason you decide not to buy the house you will generally get it back as well.
However, if you default on the contract, it is possible that the seller can keep funds. Make sure to consult with your real estate agent about how this works.

You generally pay the appraisal fee during the loan application. Most areas are $750. This fee comes directly from the VA and is required on most loans. Be prepared to pay this upfront fee is one your closing costs.
It’s important to keep in mind that the appraiser is there to determine the value and the health and safety of home. They do not get into extensive detail on the quality of the house or any underlying issues. You will  need to get a home inspection for this.

The home inspection is an optional cost that most buyers take. An independent inspector of your choice does the home inspection.
This is not a required cost, and the prices can vary. Typically, you will see $350-$750 is the range depending on the work provided. A home inspector will go into much greater detail on the homes quality than the appraiser.

Closing costs are very typical if you’re getting a mortgage to buy your house. These costs are broken up into many different layers. The two significant categories of closing costs are

1. loan closing costs
2. escrows (property taxes/insurance)

Your loan officer will be able to provide you an estimate both of these. Keep in mind; this is just an estimate. It’s not possible to know precisely what all the costs are when you first go under contract.

Property taxes, homeowner’s insurance, potential HOA change fees, and many other possible fees can pop up as you go through the process. It’s essential that you work with a good lender that can come very close in their estimates but don’t be surprised if the final number is slightly different

VA allows the seller, the real estate agent, and the lender to contribute toward your closing costs. This isn’t always realistic, but it is permitted. Many veterans end up needing between $3,500-$5,500 for all their closing costs and escrows.

One of the enormous benefits of a VA loan is the fact that there is no required down payment. Most other loans do require a down payment. These down payments range from 3 to 5% at a minimum.

Although VA does not require a downpayment, there are indeed some benefits to it. By putting more money down, it will lower your monthly mortgage payment. An even more exciting fact, it reduces VA’s funding fee. If you put just 5% down your funding fee can drop from 3.3% to 1.5% saving you thousands.

To learn more about a VA funding fee, please contact one of our representatives.

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