VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Besides the advantage of requiring no down payment for qualified VA borrowers, there’s also a distinct advantage for the borrower regarding closing costs. The veteran is limited to the types of closing costs that may be paid, helping the veteran save money at the closing table. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida. But if there are costs associated with a VA mortgage and the veteran isn’t allowed to pay for them, who does?
The Types. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
A common way to remember which costs a veteran is allowed to pay for is to remember the acronym ACTORS. That stands for:
- A Appraisal
- C Credit Report
- T Title Insurance
- Origination Fee
- R Recording Fee
- S Survey
These are common charges found on most every VA mortgage and while they can vary a bit by an amount; these fees are the ones that can be paid for by the veteran. But what about these charges?
- Tax Service
These fees and others are an example of charges that the veteran is not allowed to pay. Even though the VA lender requires a processing and an underwriting fee in order to approve the VA loan refinance, the veteran may not pay for these charges and any other fee deemed “non-allowable.” So if the veteran can’t pay them, who does?
The Seller Can. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
Non-allowed closing costs can be paid by the seller of the property and are typically the initial method of dealing with such charges. As part of a sales contract, the buyer can say, “We’ll pay you $200,000 for this home as long as you pay for $3,000 in closing costs.” VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Paying for a buyer’s closing costs is considered a seller concession, and is limited to four percent of the sales price of the home. If a home sells for $200,000, then the seller can only pay $8,000 of the buyer’s costs.
Such concessions can be used to pay for the buyer’s VA funding fee, loan refinance Miami Fort Lauderdale Florida costs, property taxes, and insurance among others. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
The Agent Might. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
A real estate agent representing the buyer can contribute toward closing costs in the form of a credit at the closing table. Real estate agent commissions are paid for by the seller of the property and typically represented as a percentage of the sales price.
When a real estate agent brings a buyer to a seller and there are two agents, the listing agent and the selling agent, the commission is typically split between both agents. If the sales commission is six percent, each agent gets three percent each for their services. Some states don’t allow the practice of an agent contributing toward a buyer’s closing costs so check to see if it’s okay in your area.
The Lender Can. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
The lender can offset part or all closing costs with a lender credit. Lenders can offer a credit to a borrower by adjusting the borrower’s interest rate. It’s like paying a point to get a lower interest rate but in reverse.
For example, a VA borrower applies for a 30 year fixed rate VA mortgage and is offered a 3.75 percent rate. The lender offers the buyer a lower rate if the buyer pays one point, or one percent of the loan refinance Miami Fort Lauderdale Florida amount. The choice is 3.75 with no points or 3.50 with one point.
In the other direction, the lender can offer 3.75 percent with no points and 4.00 percent with one-point credit to the borrower. On a $200,000 loan refinance, the lender can increase an interest rate by about one-quarter of one percent and the borrower gets a $2,000 credit toward closing fees.
The Borrower Can. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
The seller can pay, an agent can pay, the lender can pay but the borrower also has one more way to pay non-allowable closing costs. Recall that an origination fee is an allowable charge. An origination fee is represented as one percent of the loan refinance Miami Fort Lauderdale Florida amount.
In lieu of charging the borrower non-allowed fees, the lender can charge a one percent origination fee instead of itemized non-allowable charges for things such as attorney or underwriting charges.
Closing costs on VA loan refinances are indeed a different breed compared to FHA or conventional loan refinances, especially with regard to who is responsible for any particular fee. If there are any questions about who pays for what, those questions should be asked directly to your loan refinance Miami Fort Lauderdale Florida officer. VA costs can be confusing, there’s no need for them to be.
It’s possible that you’ve heard or used this term before but unless you’re a veteran using your home loan refinance Miami Fort Lauderdale Florida benefit to buying a home; it’s not a term you’ll run across during your daily routine. The VA home loan refinances Miami Fort Lauderdale Florida benefit is a special government-backed mortgage used to finance a primary residence and does not require a down payment from the borrower along with reduced closing costs and relaxed approval guidelines compared to conventional loan refinances. What is a VA no-no?
No Money Down. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
The first “no” represents no money down from the borrower. As part of the original G.I. bill crafted in 1944, this special entitlement was provided to returning service members to help them assimilate to civilian life once again and get a fresh start in the working world as a new homeowner.
Back then, home loan refinances required a down payment. A sizable one in many instances with some banks offering mortgages only to those with a down payment of 20 to 30 percent or more. That left home ownership to those well off, leaving much of the working class out of the picture.
The G.I. bill recognized that while our soldiers were fighting and protecting our freedom, they didn’t exactly have time to set up a savings plan. Even if they did pull some time off, there was little to save. Providing a veteran an opportunity of home ownership and waiving the down payment requirement is the shining feature of the VA mortgage program.
The Second No. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida.
The next part of our “no-no” equation refers to closing costs. As in, not having any. A VA no-no is the nickname given to a VA loan refinance Miami Fort Lauderdale Florida where the veteran doesn’t have to pay any closing costs along with no down payment requirement.
Not a bad deal and only reserved for VA mortgages. VA Loan refinance No Closing Costs in Miami Fort Lauderdale Florida.
But the second “no” doesn’t mean there are no closing costs, it’s just that the veteran doesn’t have to pay them. There certainly are closing costs including appraisals, a credit report and origination fees among a host of others.
The borrower also has to have homeowners’ insurance on the property and property taxes must be settled as well. So how does the veteran get away with no closing costs? There are a couple of ways.
The Seller Contribution. VA Loan refinance No Closing Costs in Miami Fort Lauderdale Florida.
Seller contributions refer to amounts paid for on the buyer’s behalf by others. These contributions, called “concessions” are limited to 4.00 percent of the sales price of the home. That means if a home is selling for $300,000 then the seller is allowed to contribute up to 4.00 percent of $300,000, or $12,000 in closing fees. Anything beyond that is prohibited.
Yet that’s quite an amount. Closing costs on a traditional VA loan refinance Miami Fort Lauderdale Florida on a $300,000 home might be closer to $6,000, not $12,000.
How does the buyer get the seller to pay the closing costs? The buyer asks. When making an offer on a home, the sales contract can read: “Seller to pay closing costs on behalf of the buyer not to exceed 4.00 percent of the sales price.”
The seller can agree or disagree. Or counter with a specific offer of “Seller will pay up to $3,000 of the buyer’s closing costs.” But what if the seller doesn’t agree to cover certain fees or pay any of the buyer’s costs whatsoever?
The Lender Credit. VA Loan refinance No Closing Costs in Miami Fort Lauderdale Florida.
Another method of paying for closing costs comes from the VA lender directly. A VA lender can offer a lender credit that can be applied to the buyer’s closing costs by adjusting the interest rate on the mortgage. How so?
It’s common knowledge that borrowers can reduce the interest rate on their loan refinance Miami Fort Lauderdale Florida by paying a discount point to lower the rate. For instance, if a 30 year fixed rate is at 4.00 percent today without any points, the lender might also offer a lower rate of 3.75 percent with one point. On a $300,000 loan refinance, that’s $3,000.
Conversely, a lender can increase an interest rate and provide a credit to the borrower in exchange for the higher rate. Using this example, a lender might offer a 4.25 percent rate, one-quarter higher than the 4.00 rate with no points, and offer a one-point credit to the borrower. In this example, applying $3,000 towards the borrower’s costs.
That’s a VA no-no. It takes some preparation as well as negotiation and the seller, as well as the lender, can both contribute to the cause. No money down and no closing costs are financial music to a veteran’s ears.
Mortgage Costs & Fees
Every mortgage comes with closing costs and related expenses. For many homebuyers, closing costs are one of the most confusing parts of this entire journey.
In fact, “closing costs” is really a catchall term. There are all different kinds of costs and fees that can be part of finalizing this process. In the mortgage world, you’ll also hear these referred to as “settlement charges.”
Some of these costs represent the actual costs of doing a loan refinance. Others involve expenses like homeowners’ insurance and property taxes. Some need to be paid before you get to the closing table, while others can wait until that happy day arrives.
Your closing costs will vary depending on a host of factors, from your lender and loan refinance Miami Fort Lauderdale Florida type to the location and more. With VA loan refinances, this program actually limits what buyers can pay in closing costs. In fact, there are certain costs and fees that VA buyers aren’t allowed to pay.
Who pays what in closing costs and concessions is always up for negotiation. It’s important to understand that sellers aren’t obliged to pay any costs on your behalf. But you can always request that the sellers pay a portion or all of the closing costs when you’re making a formal offer on a home.
Let’s first take a look at the different kinds of loan refinance-related costs you’re likely to encounter.
Loan Refinance-Related Closing Costs
Here’s a rundown of some of the common loan refinance-related closing costs:
The VA allows lenders to charge up to 1 percent of the loan refinance Miami Fort Lauderdale Florida amount to cover origination, processing and underwriting costs. They can choose to either charge you a flat 1 percent origination fee or pick and choose among a host of fees, so long as they add up to no more than 1 percent. If the lender isn’t charging the flat 1 percent fee, then VA buyers can pay some fees and charges that would otherwise be unallowable.
- Appraisal fee: VA buyers are required to get an appraisal. We cover the VA appraisal process in detail in Course 7: Loan refinance Miami Fort Lauderdale Florida Processing. Appraisals typically run about $425. The VA sets the costs for appraisals, not the lender. This is a cost buyer will have to pay upfront. You can get a look at the current appraisal fees for your state at the VA’s website.
- Title charges: Title insurance protects lenders and homebuyers if liens, legal defects or other title-related issues are discovered after closing. Lenders will usually require the purchase of lender’s title insurance, which only protects their interest in the property. You should strongly consider paying the one-time fee for owner’s title insurance to ensure you’re covered as well.
Buyers can pay “points” to lower their interest rate. A point is equal to 1 percent of the loan refinance Miami Fort Lauderdale Florida amount. You’ll also hear this called a “permanent buy down,” because you’re paying money upfront to buy a lower interest rate. This isn’t something many VA buyers do, but it’s an option and a loan refinance-related cost.
Some lenders may charge a fee for accessing your credit information. Generally, the VA says this cost shouldn’t exceed $50.
Well, septic and termite inspection fees:
Buyers may need some or all of these depending on the property. In all but nine states, VA buyers aren’t allowed to pay the termite inspection fee, which in most cases is covered by the seller. But buyers may be able to pay for any repairs stemming from well, septic or termite issues.
Non-Loan refinance Miami Fort Lauderdale Florida Closing Costs
Now, here’s a look at some of the common closing costs not directly related to obtaining a home loan refinance:
Prepayment of your property taxes and homeowners’ insurance.
You might hear these referred to in the context of an “escrow account.” Your local municipality will levy property taxes on an annual basis. You’ll also be responsible for paying for homeowners’ insurance. At least a portion of these annual bills will be due at closing.
Daily interest charges:
Your mortgage is paid in arrears, meaning your monthly payment actually covers the previous month you lived in the home. So if you close in mid-September, your first mortgage payment wouldn’t typically be due until November 1. But lenders will collect prepaid interest on the loan refinance Miami Fort Lauderdale Florida between your closing date and the end of the month you close. Lenders calculate it as a per-day rate (yearly interest cost/365 days per year = one day of interest payment). That prepayment is due at the closing table.
State and local governments charge a fee to record your deed and mortgage-related documents. Some of the details of your real estate transaction will become public records, accessible to anyone in your community and beyond.
Homeowners Association (HOA) fees
: There may be costs and fees associated with closing a loan refinance Miami Fort Lauderdale Florida on a property in a homeowners’ association. It’s common for homeowners’ associations to charge annual dues, which may need to be factored into your closing cost picture.
Home Warranty fees:
There may be a fee involved with obtaining a home warranty on a property. These policies will often cover the cost of certain repairs during the first year you own the home.
Real estate commissions:
The listing agent and the buyer’s agent will often split a predetermined commission that reflects a percentage of the home’s sale price. This typically comes out of the seller’s sale proceeds. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Closing Costs v. Concessions
One of the big benefits of VA loan refinances is that sellers can pay all of your loan refinance-related closing costs. Again, they’re not required to pay any of them, so this will always be a product of negotiation between buyer and seller.
In addition, you can ask the seller to pay up to 4 percent of the purchase price in “concessions,” which can cover those non-loan refinance-related costs and more. VA broadly defines seller concessions as “anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide.” VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Some of the most common seller concessions include:
- Having a seller cover your prepaid taxes and insurance costs
- Having a seller provide credits for items left behind in the home, like a pool table or a riding lawn mower
- Having a seller pay off your collections, judgments or lease termination fees at closing
In some respects, as long as you stick to that 4 percent cap, the sky’s the limit when it comes to asking for concessions.
VA buyers are also subject to the VA Funding Fee, a mandatory charge that goes straight to the VA to help keep this loan refinance Miami Fort Lauderdale Florida program running. For most first-time VA buyers, this fee is 2.15 percent of the loan refinance Miami Fort Lauderdale Florida amount, provided you’re not making a down payment. Buyers who receive VA disability compensation are exempt from paying this fee.
The funding fee is the only closing cost VA buyers can roll into their loan refinance Miami Fort Lauderdale Florida balance, and that’s how most borrowers approach this fee. You could ask the seller to pay it, but doing so would count against the 4 percent concessions cap. The other potential approach would be to ask the seller to lower the purchase price by whatever the fee totals. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Closing Costs in Your Purchase Offer
One of the early questions many borrowers have is: What are my closing costs? It’s an important question for a lot of reasons. Many VA buyers want or need the seller to pay at least some of these costs, if not all of them. And that means asking for a specific percentage or dollar amount in your purchase offer. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
Where things can get confusing is that lenders can only give you a rough estimate until you’ve zeroed in on a property. That’s in part because they’ll need the property address in order to estimate things like homeowners’ insurance, property taxes and more. Some lenders will provide a “fees worksheet” or some other document to help give you a broad idea of closing costs. Other times, a loan refinance Miami Fort Lauderdale Florida officer might provide a rough estimate based on other recent purchases in that community.
But you won’t get an official estimate of your closing costs until a lender has a full application that includes information on your income, your credit, and a specific property address. Once a lender has that application in hand, they’re legally required to send you some key documents and disclosures within three business days. One of the most important is the Loan refinance Miami Fort Lauderdale Florida Estimate.
The Loan refinance Miami Fort Lauderdale Florida Estimate
This is a relatively new document that came out of the banking and mortgage industry reforms following the housing crisis. The new Loan refinance Miami Fort Lauderdale Florida Estimate replaced two longtime federal forms, the Good Faith Estimate, and the initial Truth-in-Lending statement.
The Loan refinance Miami Fort Lauderdale Florida Estimate offers a detailed picture of the loan refinance’s estimated costs and fees along with some of its key features.
The Loan refinance Miami Fort Lauderdale Florida Estimate will include:
- A closer look at the loan refinance Miami Fort Lauderdale Florida amount, the interest rate and the monthly principal and interest payments of the loan refinance
- Your projected monthly payments over the life of the loan refinance
- A detailed breakdown of your estimated loan refinance-related closing costs, such as origination charges, appraisal fees, title insurance and more. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
- A detailed breakdown of other estimated costs to close, such as prepaid taxes, homeowner’s insurance and interest charges
- A total estimate of how much cash you’ll need to close, including the down payment amount
- Information about your borrowing costs, annual percentage rate (APR) and total interest percentage (TIP) that you can use to compare with other loan refinance Miami Fort Lauderdale Florida offers
- Information about appraisals, assumptions, late fees, loan refinance Miami Fort Lauderdale Florida servicing and more
Along with your Loan refinance Miami Fort Lauderdale Florida Estimate, the lender will identify what closing-related services you can shop for and include a list of companies you might consider. Some of these services can include things like title work, closing agents and homeowners’ insurance. Regarding the services for which you can shop, you’re not required to use any of the companies identified by the lender. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
The Loan refinance Miami Fort Lauderdale Florida Estimate is ultimately an estimate, and that means some of the projected costs can change. But there are limits on what charges can and cannot increase and by how much. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
With the Loan refinance Miami Fort Lauderdale Florida Estimate, you’ll have a good look at the estimated costs needed to get into your new home. That’s critical information when you’re making an offer and asking a seller to cover some or all of your closing costs. You need to know what to ask them for, right?
This is why it’s so important for VA buyers to get pre-approved and to talk with their lender before making an offer on a home. The sooner you and your real estate agent communicate with your lender about a specific property, the faster they can prepare a Loan to refinance Miami Fort Lauderdale Florida Estimate. And that helps ensure you ask for the right amount of closing costs and concessions in your offer.
To be sure, every purchase situation is different. If you’re in a hot real estate market or there are multiple offers on a property, you may not have time to wait for a Loan refinance Miami Fort Lauderdale Florida Estimate to be issued. Talk with your real estate agent and your lender about how best to proceed. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
What if the Seller Balks?
Sellers often realize they need to engage in some give-and-take in order to sell their property. But not all markets are competitive, and not all sellers are motivated.
Sellers aren’t required to pay any of your closing costs. Even if the VA doesn’t allow a buyer to pay for something, that doesn’t automatically mean it’s up to the seller. So what happens if the seller refuses to cover some or any of your closing costs?
Talk with your real estate agent and your lender about your options. You may be able to increase your purchase offer by a number of your closing costs. For example, let’s say you’re buying at $150,000 and your closing costs are $5,000. You may be able to increase your offer to $155,000 and have the seller use those proceeds to cover your closing costs. They still net the same $150,000 in this example.
One of the challenges with this approach is making sure the home appraises for the higher amount. Lenders will lend whichever is less between the purchase price and the property’s appraised value. The other challenge is making sure you can afford the higher amount. You should also understand that this scenario means you’re effectively paying these closing costs with interest over the life of the loan refinance because you’re borrowing more money. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida
You may also be able to have the lender cover these costs. To do so, you’ll usually have to take a higher interest rate. You may also be able to use gift funds from a family member or close relation. VA Loan Refinance No Closing Costs in Miami Fort Lauderdale Florida