Let’s take a closer look at VA streamline closing costs and what to expect. You might have heard different places offer no closing costs. No closing costs sound great, but is there such a thing? Well, yes and no. While it is possible to not pay any money at closing, that doesn’t mean there aren’t closing costs or that the loan is free. Watch the video below as Eric explains.
Understanding VA Closing Costs
No matter how many billboards you see or mailers you get promising no closing costs, that doesn’t change the fact that every single loan has a cost. The trick to understanding VA streamline closing costs is knowing what they are and where they’re coming from. Just a few are origination charges, discount points for a lower interest rate, credit report fees, taxes from the county assessor, and title fees.
Some lenders may try to quote lower than what the closing costs are, and then you get a big shock when you realize that money has been tacked on somewhere else or was just given a different name. Technically, there are several charges listed on a closing disclosure that are not itemized as closing costs. These include things like insurance, interest, and taxes, which are officially termed as “prepaid charges.” But don’t be fooled just because the charges are called something different. At Low VA Rates, closing costs are closing costs. The next time you are given a quote, be sure to ask where the prepaid costs are factored in.
Given the choice between lower closing costs and a lower interest rate, which would you choose? When one goes down, the other must come up in almost all cases. The biggest step to make is deciding which is more important to you in your situation. For lenders, it doesn’t matter which you choose. At the end of the day, they are going to make the same money either way.
Now, why would you be willing to take higher closing costs? Because the interest rate will be lower, saving you more money over the life of the loan and affording you lower monthly payments. The exchange is taking a higher closing cost at the start.
However, going with this plan doesn’t always make financial sense. For example, you might want a higher rate if you’re going to move out of your home in just a year. In this case, the amount you’d save in closing would make up for the extra you’d pay in interest rates.
The biggest things to remember are that there will be costs with your loan and no matter how those costs are assessed, the lender is still getting the same amount from you. Stay informed about your loan to avoid as much risk as possible. For any of your loan needs and questions, Low VA Rates is here to help! Call us now at 855-223-0705.
In our next section we talk more about the VA Interest Rate Reduction Refinance Loan and the breakeven analysis of doing a refinance loan.