VA No Closing Cost Refinance
VA No Closing Cost Refinance. The VA (Veterans Administration) mortgage loan is a great opportunity for veterans to achieve the purchase of their own dream house since the end of World War II in 1944, when this program became known. With over 14 million veterans and military members taking advantage of this benefit. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
VA No Closing Cost Refinance is so attractive when are the flexible requirements and higher refinancing and cash-out refinancing amounts than many conventional loans. This allows more homeowners, especially those who are in difficult housing and financial markets to refinance their mortgage. But like the other loans buying a house comes with cost and fees. The VA limits the amount of fees the lender can charge. VA No Closing Cost Refinance is a great benefit. However there are still expenses that need to be paid by the buyer. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
These expenses are known like closing costs, which represent the actual cost of doing a loan, and they can come in different forms. The cost, as closing costs on a refinance typically run about $4,000. Keep in mind that the types of fees and their amounts vary greatly by geographic location. Many of the items can be paid for by the seller of the home and can be negotiable when presenting an offer on a home to the seller. VA allows sellers to pay all of a VA buyer’s mortgage loan-related closing costs and up to 4% in concessions.
Below is presented a description of the types of closing cost, that you should know first:
Allowable VA Closing Costs
Reasonable closing costs may be charged by the lender. These costs may not be included in the loan. The following items may be paid by the veteran buyer, the seller, or shared. Closing costs may vary among lenders and also throughout the nation because of differing local laws and customs. The different closing cost are:
Prepaid finance charges (PFC) items: are items which the buyer has to pay in advance. Lenders require insurance policies and taxes to be paid in advance and can include things such as:
Escrow for prepaid interest, property taxes and homeowners insurance
This fee varies hugely because it is determined by the taxes and insurance on the home, the time of year the sale closes, and when taxes are collected in the property’s jurisdiction. These funds are required, so that when taxes and insurance become due, there’s enough in reserve to pay them. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
If the house you want to buy is in a flood zone, you’ll need to insure the house against flooding since the lender requires it, which is not covered by the standard homeowner’s insurance policy. The flood insurance first year’s premium will need to be paid for at closing of the loan. The insurance is based on the value of the home being insured.
This is the standard insurance policy that protects against things like fire, trees falling on the home, etc. It does not cover flooding and may or may not cover earthquake-related damage. The cost is based on the value of the home being insured. The full year’s premium will be due at closing. Usually, the lender collects 1/12th of the yearly premium with the mortgage payment, and pays the insurance company yearly
The VA Funding Fee
The VA Funding Fee is paid to the VA to help fund the program and varies depending on type of service, loan amount, down payment and subsequent VA Loan usage. A basic funding fee of 2.15 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent. VA buyers don’t have to pay the funding fee in cash. Many choose roll into the loan or ask the seller to pay.
Homeowners association dues if applicable
When you own a home, some of your money goes towards homeowner’s association dues, condo fees, and property taxes that never go towards your home ownership.
Discount points can be paid by the veteran provided the fee goes directly to reducing the interest rate. Discount points are separate from the origination fee, because this money is used to buy a lower interest rate rather than to compensate the lender.
– 1% Origination Fee
The VA caps the lender’s compensation on VA loans to 1% of the loan amount. This fee is meant to compensate the lender in full. Fees for items such as processing and underwriting may not be charged if this 1% fee is charged to the veteran. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
Third party fees or Paid outside closing (POC) costs: Companies involved in the transaction other than the lender are called third parties and Their charges are called third party fees. These cost aren’t factored into your overall financing, but they still have to be covered, here are some common fees:
The lender will request an appraisal straight from the VA website. VA will then select an approved VA appraiser. The VA appraiser will determine the value of the home as well as ensure it meets VA minimum property requirements for VA loans. If you are using a VA streamline to refinance your home, an appraisal is not required and this fee will not apply. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
– Title examination and Title Insurance
This fee varies hugely because it is based on the purchase price of the home, the loan amount, and geographic location. The title examination and title insurance protects the lender and owner of the home in the case that someone in the future claims they have ownership rights to the house, and wins in a court of law. If that were to happen for any reason, the title insurance company would reimburse the lender and owner of the home for the loss.
– Recording Fee
This fee is set by the county or jurisdiction where the home is located. Recording just means that the sale or refinance becomes public record, so that the shire knows who is responsible to pay taxes on the home, which banks have loans out on the home, etc.
– Credit Report
The lender must pull a credit report to determine your past credit history. The report usually shows three credit scores from the major credit bureaus: Experian, Equifax, and Transunion, and the middle score is used for qualification purposes.
– Non-Allowable Closing Costs
There are plenty of other potential costs and fees the VA does not allow homebuyers to pay. Minimizing closing costs remains one of the biggest VA loan benefits. These items cannot be charged in lender’s flat 1% fee. Here are some non-allowable costs:
- Lender document fees.
- Recording fee above $17.
- Notary fees.
- Transaction Coordinator fees.
- Broker fees.
- Loan closing, settlement, application, or processing fees.
- Preparing loan papers or conveyance fees.
- Attorneys services other than for title work.
- Interest rate lock – in fees.
- Postage and other mailing charges, stationery, telephone calls and other overhead.
- Amortization schedules.
- Pass books, and membership or entrance fees.
- Escrow fees or charges.
- Preparation and assignment of mortgage to other secondary market purchasers.
- Trustee’s fees or charges.
- Fees for preparation of truth-in-lending disclosure statement, fees charged by loan brokers, finders or other third parties
- Tax service fees
HOW TO GET A NO CLOSING COST REFINANCE?
Oftentimes veterans believe that closing costs are covered by a VA mortgage. While that is not technically true. Here are some ways to get a no closing cost refinance:
- The loan amount will be the purchase price or appraised value, whichever is less (plus the VA Funding Fee). So if you want your closing costs covered by the loan, you need to increase the price and have a stipulation that the seller will pay the closings costs and pre-paid expenses equal to the amount by which you have increased the price. As long as the home appraises for the increased price, you will have the closing costs paid as part of the deal. But that also means you’re financing this cost over the life of your loan.
- Lenders have a couple of options when it comes to the costs related to originating and processing your loan. They can charge a flat 1 percent origination fee (along with the other normal charges up to a reasonable amount) or skip the flat rate and charge fees on an individual basis, as long as the total dollar amount doesn’t exceed that same 1 percent of the loan amount. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
- Who actually pays your closing costs often depends on what you’re able to negotiate with the person selling you the home. The VA has no cap on how much a home seller can contribute toward a buyer’s loan-related closing costs, so you can certainly ask the homeowner to cover all of it. In addition, a seller can pay up to 4 percent of the loan amount in what’s known as concessions. These are things like prepaid finance charges or liens against the borrower. But sellers are under no obligation to pay anything. Homebuyers in housing markets that are starting to heat up may find some sellers reluctant to take on all or even some of those closing costs. But for VA borrowers it’s still pretty common to have the seller pay most if not all. VA No Closing Cost Refinance Miami Fort Lauderdale Florida
- The lender will be able to offer you a VA no closing cost refinance out of pocket costs, where all the closing costs are rolled into the loan in exchange for a slightly higher rate on your loan, then you don’t have to bring any money to closing. This is fairly common with the VA streamline program. But you cannot get cash back at closing. When you see a lender advertise a no closing cost VA streamline refinance, you need to be more careful, because sometimes no closing cost lenders often are mis-labeled and should be called no out of pocket closing cost lenders because they roll your refinancing costs into the loan. So, you might get a 3.5 percent interest rate if you pay closing costs, but a 3.9 percent rate if you don’t. Other times, the mortgage company will simply add all of the closing costs, tax and insurance escrows onto your total mortgage balance, giving you a bigger total mortgage bill.
WHEN IS BETTER TO PAY CLOSING COST?
If you plan to stay in the home long term, it is usually a good idea to go ahead and pay the closing costs and take the lower interest rate or lower total loan balance. The reason: Over the long term, you’re likely to pay more in interest than you would have in closing costs. The VA No Closing Cost Refinance can make sense for some people in general, those who don’t plan to stay in their homes for more than five years or who will probably refinance again soon. In this instance, the slightly higher monthly interest payments they will pay usually won’t end up exceeding the amount they would have paid in closing costs, assuming they sell the house (or refinance) within about five years.
Obviously, each buyer will need to do his or her own math on this by determining how long they want to stay in the home and what the higher mortgage interest payments would be over that period vs. what the total closing costs would be.
A VA No Closing Cost Refinance can also make sense for people who need to do renovations on their home but don’t have the cash to do them. You may get a better deal by taking the slightly higher interest rate (or adding on to your loan balance, which would also mean you have higher interest payments each month) on the refinance loan than you would on taking out a home equity loan. (This, obviously, depends on interest rates for both loans). VA No Closing Cost Refinance Miami Fort Lauderdale Florida