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How To Get A No Cost VA Loan

Have you ever wondered who pays closing costs on a VA Loan? Can you roll closing costs into VA  Loan?  Or does VA Home Loan cover closing costs?  Or even better, can closing costs be included in VA loan?

Recently there has been much talk about No Cost VA Loans, and is there such a thing as a no cost VA Loan?  According to the CFPB, or  Consumer Finance Protection Bureau, yes there is!   (Hint: there are costs for all loans, but keep reading to learn how to make your lender pay for all of your up front loan costs)

Who is the CFPB ? None other than ‘THE’ watchdog on the street that makes sure that all lenders follow the rules, from Wall Street to Main Street.

WHAT ARE THE ‘REAL’ or ‘HIDDEN’ LOAN COSTS OF A NO COST VA LOAN?

Buying a home can be an expensive endeavor. Luckily, with your VA Loan, you are not required to make a downpayment. However, there are costs involved with purchasing a home, such as:

  • Title fees
  • lender fees
  • appraisal fees
  • taxes
  • insurance
  • prepaid interest

that must be paid as you close on your loan.

But the fees don’t always stop there! Depending on the particular home you purchase, there may be:

  • HOA fees
  • Well Inspections
  • Septic Inspections.

Don’t get me started!

However, depending on the lender with whom you choose to finance your home, you may be presented with a ‘No Cost VA Loan’ Alternative.  This is how you roll closing costs into VA Loan

HOW TO GET A NO COST VA LOAN

First of all, if you talk to two unique, separate VA Lenders, you may find that for the exact same rate, exact same day, and exact same rate (let’s say the rate is ‘X’),

Lender A: Is CHARGING you $1,500 for this rate
Lender B: Is GIVING you $2,500 for this rate

WHAT THE?!?!  Is this for real? Sadly, this is a very likely, real world scenario. Not all lenders are created equally. Not all lenders want the same for their Veterans whom they serve. I am proud to be in the Lender B category. Try me.

OK, So now you know Lender B is looking out for you, so now it’s. Time to get down to business. What’s the Standard VA Loan rate as compared with a No Cost VA Loan? The simple answer is this: probably about .50% higher than a VA Loan, like this:

X.00% Standard VA Loan Rate
X.50% VA No Cost Loan Rate

Let’s say on that any given day for the rate of ‘X’, or X%. (Which could be 3.5 or 4.25 ,etc, based on the market) the lender would charge their normal fees, plus you, the Veteran, would be responsible for

Title Fees
Prepaid Taxes
Appraisal Fee
And Insurance.

Let’s say the total costs and fees for your loan are $5,000 for the rate of X (Which could be 3.5 or 4.25 ,etc, based on the market).

However, for a rate of X + .50%, or X.50%, (Which could be 4.00% or 4.75% ,etc, based on the market + .50%) Lender B (that would be me) would provide you a credit of $$5,250.00 to help cover these fees.

Hence, this is how to get a no cost VA Loan,  because the lender credit for the rates greater than the loan costs. Yeah! The Holy Grail of the No Cost VA Loan!

How Can The Lender Pay These Fees and Still Make Money?

Great question! Over the life of your loan, the lender is willing to bet that you, the Veteran, will make enough payments to cover the up front credit they provided to help you pay your closing costs. It’s assumed by the lender when they provide your your rate and credit, or X.50% that the extra .50% they charged will come back to them over time.

To that theVA says, “Well hold on there lender. We take care of our Veterans’.

The VA established the VA IRRRL, or VA Interest Rate Reduction Refinance Loan that allows the Veteran to refinance into a lower rate in as little as 210 days after taking out A VA HOME Loan. So, if the Veteran can beat the system by getting a lower rate after the 210 days is up, then the Veteran has won the No Cost VA Loan game.

From my experience, I see this play out frequently. There’s a good chance that the Veteran can refinance to a lower rate after having benefited from the Non Cost VA Loan ‘soon’ after closing on their new VA Loan. However, the future is not yet determined, nothing is set in stone. The bank may win over time. But there’s a good chance that together, we can position you to be in the best possible VA Loan rate over time.

BOTTOM LINE – HOW TO GET A NO COST VA LOAN

The bottom line is this: Even with the best priced lender, you will still pay a higher rate for a No Cost VA Loan over a standard VA Loan, which in turn can cover some, or all of the others fees associated with a VA Loan.

Why Do Some Lenders Charge Veterans Fees at the Same Rate other Lenders are offering Generous Lender Credits?

Overhead. Plain and simple. More management and more real estate expenses means higher cost to Veterans!  Typically, the bigger the bank, the more middle management and overhead the bank has to pay to keep it’s business model churning. Generally speaking, a mortgage broker is going to offer you the lowest rates and fees on a VA Home Loan.  How to get a VA No Closing Cost Loan often times involves, here’s the real secret:  workgin with a mortgage broker.

As a loan officer who works side by side with a mortgage broker, we are constantly scouting out the lowest priced VA Home Loan Lenders with whom to partner.

This is our niche, our special service to our fellow Veterans. We work hard to find the lender-du-jour who’s most hungry for your VA Home Loan.

Many, many times Veterans come to Pilot Mortgage, LLC after having been quoted rates and fees from another bank and are shocked to see that for the EXACT SAME RATE we are charging a few thousand dollars less.

I warmly welcome you to call me and experience this for yourself. 480.999.3339 / (480) 999-3339

THE TAKEAWAY – HOW TO GET A NO CSOT VA LOAN

So what’s the takeaway here? There are three takeaways:

  1. Not all VA Home Loan Lenders offer a No Cost VA Loan. At Pilot Mortgage, LLC, we love these loans as if they were our weird loan-family children. They’re AWESOME!
  2. You will pay a slightly higher rate with a VA No Cost Loan than with a standard VA Loan.
  3. You can refinance to a lower rate in as little as 210 days after you start your VA No Cost Loan.

I hope this article has been helpful in helping you to answer the below questions.  Looking forward to speaking with you soon!

Have you ever wondered who pays closing costs on a VA Loan?

Does VA Home Loan cover closing costs?

Can closing costs be included in VA loan?

VA FUNDING FEE TABLE / CHART 2019 (.PDF Download)