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A Quick Guide to VA Loans
THE COST OF HOMEOWNERSHIP
One of the common errors made by people buying homes is to think that the only cost will be
monthly payments of principal and interest on the mortgage. It is important to keep in mind
that there are other items which have to be paid which add up to a substantial outlay. Before
you buy, be sure that your income is sufficient to cover all of the cost which you will
have to pay.
Initial Cash Outlay--Closing Costs
First, you must have enough cash to make a downpayment, if required. (The downpayment is
the difference between the purchase price and the amount of the loan which the lender
will make to you.)
Then, in addition to the downpayment, you will have to pay for a number of items commonly
called "closing costs." These costs, which can be substantial, must be paid in cash at
the time the loan is made.
The term "closing costs" generally refers to all charges paid for obtaining the mortgage
loan and transferring real estate title. While the sharing of closing cost items between
buyer and seller may be agreed to in the contract of purchase, all or a significant part
of the closing costs are frequently paid by the buyer.
Among the items which the buyer may be required to pay for are title search, title insurance
(a lender's policy and, if desired, a buyer's policy), survey, credit report,
appraisal fee and related compliance inspection fee, if needed, recording fee,
State and/or local transfer taxes, a VA funding fee, discount points and a
lender's origination fee (usually 1 percent of the loan amount; for example,
$500 on a $50,000 loan). The purpose of the origination fee is to cover certain
costs to the lender in making the loan, if these costs are not paid itembyitem
by the borrower.
Certain other costs, technically referred to as "prepaid items," must be paid by the buyer
at the time of loan closing. Among such costs are the buyer's share of the current year's
real estate taxes and the first year's premium for hazard insurance. These costs also
become part of the recurring costs of homeownership due each year.
If you are purchasing a home in an area where title insurance is the method used to assure
good title to the property, it is advisable to inquire about the existing title insurance
policies (lender's and seller's) on the property, for it may be possible for you to obtain
a policy at a reissue rate. The reissue rate is usually lower than the original rate and
may be available for both lender's and buyer's policies. Reissue rates are usually limited
to the reissuance of a policy on the same property by the same title company that insured
title in the present owner within 10 years. Some title insurers will extend the reissue
rate to policies written by other companies. Your seller will probably have the
information about the date, type, and amount of any existing policy or policies that you need
to support a request to the title company for the reissue rate.
FREQUENTLY ASKED QUESTION # 37 [ -more VA Loan questions- ]
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Q: Mortgage Payments - What happens if my mortgage is sold to another mortgage company?
A: Chances are you will make payments to different lenders over the course of your VA mortgage. Selling mortgages from lender to lender is common, and sometimes a VA mortgage payment is sent to the old loan holder because notification of the new owner of your loan and your payment became crossed in the mail. If this happens, you may receive a notice of non-payment from the new loan holder. Don't delay in contacting the new owner of your VA mortgage to straighten up the problem. While it is technically up to the two lenders to fix the matter, your credit rating and payment schedule could be affected if you don't act accordingly.
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VALoans.com is a private company specializing in VA financing and is
not a government agency.
Remember, the VA does not make home loans. They insure the loans that we can assist you in getting.
Let us help you get a VA insured mortgage loan at the lowest possible rates.
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