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VA Loan Can I Really Buy With No Money Out Of Pocket
VA Loan: Can I really buy with "no money" out of pocket?
I get asked about this all of the time, so I will break this down for you.
YES- you can buy a home with $0 dollars for the down payment towards the PURCHASE PRICE of the home.
Just like you have different BAH rates- they have different VA maximum purchase rates based on where the home you are buying is at.
These rates JUST CHANGED on 1 Jan. If you need to know what the maximum purchase price is for your area, inbox me.
*** This does not mean the VA Max is the highest purchase price you can buy or that you automatically qualify for it. It means this the most the VA will back you on with 0 money down towards the down payment. You are not actually borrowing money from the VA, you are borrowing money from the bank/lender, and the VA is "backing you" on it. Which is also why you don't need mortgage insurance- saving you thousands of dollars each year.
NO- it's not $0 out of pocket. You will still have closing costs associated with the purchase (see below). Sometimes you can wrap these (or some of them at least) into the loan, but you are just carrying that as principle. You should still be able to buy with a very nominal amount of money out of your pocket.
** If you can't afford a few thousand bucks in closing costs, you should probably not be thinking about buying a house **
1. Down Payment 0%
2. VA Funding Fee: This is 2.15% of the purchase price that is rolled into the loan amount directly by VA. This is VA’s cost to maintain the VA mortgage division for veteran’s and is the way it always has been with VA. If you have a disability rating of even 0%, this is waived. This is NOT a lender fee or a fee from the agent, it's a fee from Uncle Sam for backing your note!
3. Third party fees: fees from the seller’s selected Title Company, Escrow company, County, etc. (usually around .75% of the purchase price). No matter who you are or what type of loan you get these fees will be the same since they are charged directly to you by the seller’s selected title/escrow company. The buyer and seller usually split these 50/50 and are usually .75% of the purchase price for each party, approximately.
** Sometimes you can ask (in the purchase offer) for the seller to pay all or some of your closing costs. It just depends on the market-norm for your area. Understand that if you are asking for stuff you normally cannot low ball the offer. If you ask for closing costs we need to be close to asking price.
4. Prepaid: monies owed at closing for property taxes (6-8 months), homeowners insurance, first month’s payment. (usually 1.25% of the purchase price). These are not closing costs in the sense that they are one time service fee like title and escrow, but are reoccurring costs of ownership that are due to closing, and paid upfront in advance. It's like paying your car insurance premium upfront for the year.
5) Some lenders will tack on some BS service fees etc. Not going to throw them down by name here but if you are curious who to avoid just call me and ask.
So even if the lender is not charging you any BS Fees, there will be between 2.0%-2.25% in total closing costs and prepaid due at closing.
$500,000 purchase price of the house
$10,000 at 2% Closing costs (Title and Escrow) This changes on the area you buy depending on that area tax rate.
Anybody in SOCAL that has any questions, (or anywhere really) let me know. I will walk you through everything you need to know.
If you are in California, I can also refer you to a lender who does not charge any BS fees, and specializes in VA loans.
We take care of our Veterans!
Big Block Realty