The U.S. Department of Veterans Affairs guarantees mortgage loans on behalf of eligible military veterans. Veterans can qualify for VA-backed mortgage loans of up $417,000 with no down payment required, as of March 2014. VA mortgage loans come with closing costs, but many of the costs can be included in those loans. Also, sellers or lenders can pay them. For example, VA mortgage title fees can be paid by borrowers, sellers, lenders or included in the loans themselves.
Buyer-Paid Closing Costs
VA mortgage loans feature an advantage for eligible borrowers, in that most allowable closing costs can be negotiated or even included within them. Allowable VA loan closing costs can be summed up by the acronym ACTORS, or "appraisal, credit report, title insurance, origination fee, recording fee and survey." Basically, veterans using a VA loan to purchase a home pay ACTORS-related loan closing costs, including title fees. However, many veterans include buyer-paid closing costs in their VA loans, though others can also pay them.
Seller-Paid Closing Costs
Everything is negotiable in real estate, including who will pay the closing costs on a VA-guaranteed mortgage loan. The seller of the home you're purchasing with a VA loan can pay up to 4 percent of the sale price to cover your closing costs. For example, if you buy a $200,000 home using a VA-backed mortgage the seller can pay up to $8,000 to cover your closing costs.
Lender-Paid Closing Costs
On VA-backed loans, mortgage lenders can cover a borrower's closing costs by adjusting loan interest rates slightly upward. By offering you a VA mortgage with a slightly higher interest rate, your lender is able to give you a closing credit that could amount to thousands. Using the credit given you by the lender of your VA mortgage, you can then cover title fees and other closing costs. Paying a higher rate on your VA loan, though, means you'll pay more for it over time.
Nonallowable Closing Costs
There are some mortgage loan closing costs which VA homebuyers aren't allowed to pay. Nonallowable closing costs for VA loan borrowers include underwriting fees, escrow fees, document preparation fees, processing fees and attorneys fees. However, the home seller and lender involved in a VA mortgage transaction can pay nonallowable fees for the buyer, usually through a credit to the buyer. Also, nonallowable fees paid for by home sellers in VA mortgage transactions count against the 4 percent sale price contributions they're allowed to make.