VA Jumbo Loan Closing Costs Explained
Jumbo loan closing costs on a house can add 2 to 5 percent of the loan amount onto the cost, or more. And the amount must be paid at closing, which troubles a lot of people financially. Closing costs for any jumbo loan are going to be much higher than for conforming loans. Luckily for veterans, the VA makes closing fees much simpler and more affordable. The VA allows the borrower to pay only for certain costs, keeping that price considerably lower than it would be otherwise. Along with this, there are many other options for who pays for those and remaining closing costs.
Jumbo Loan Closing Costs Veterans Are Allowed to Pay
There are a few things the borrower can pay. These include the appraisals, the origination fee, the credit report, the title insurance, the survey, and the recording fee. These costs add up quickly, but they cannot exceed 1 percent of the loan amount.
Appraisals: a jumbo loan typically requires a second appraisal to ensure the house meets specific standards and will not pose too much of a risk to the lender. Both appraisals can be paid by the borrower.
Origination Fee: This 1 percent of the loan amount covers the processing cost. If the lender decides to charge the origination fee, this puts even more limits on what the borrower can be charged for (although these limits are already in place for veterans purchasing with a VA loan).
Credit Report: This reports the veteran’s history of credit to the lender so they can determine qualifying rates. Unfortunately, a charge comes with getting one of these too.
Title Insurance: This protects the lender if a problem arises with the property, such as liens or title defects.
Survey: There are two types—inspection and location. The first is usually what you get when purchasing a home. This will show important details of the property like the structure’s location and sometimes boundary lines.
Recording Fee: A fee is charged to have the sale of a house legally recorded by a government official. This can only be charged to the veteran if it is under $17.
Jumbo Loan Closing Costs Veterans Are NOT Allowed to Pay
Limiting what costs a veteran is allowed to pay at closing is just one of the many benefits of getting a VA loan. This list is quite extensive but a few things include attorney fees beneficial to the lender, underwriting, processing, escrow, tax service, and document costs. The veteran also cannot pay for pest inspections in most states, nor can he or she pay for mortgage broker fees or penalties for loan prepayment.
Who Pays What?
Although these are the limits for what a veteran can and cannot pay, he or she may come out of closing paying much less. A few different options exist for who can cover different prices. You can turn to the seller, the agent, or the lender. There aren’t actually any VA regulations for how much can be paid by the seller, meaning the seller can pay a portion or all of this price. It all depends on negotiations where the seller might offer to pay closing costs or the borrower could ask the seller to pay in exchange for other terms. This is quite common. That being said, you shouldn’t assume the seller will cover closing, since they are not obligated to pay any of it.
In some states, it is possible for a real-estate agent to contribute closing costs in the form of credit, but this is not as common and not even allowed in some states. The last option is the lender. The lender offers credit to cover these prices if the buyer cannot, but this increases interest rates on the loan. When negotiating and placing an offer, consult with your loan specialist, who should know all the ins and outs of VA loans.