$11,000 is too much

A repeat client phoned me and she was hoppin’ mad. “We got a VA buyer offer on our house and they want us to pay $11000 in closing costs!” That made me mad, too. Here’s why.

The VA home loan program is pretty special. It allows qualified veterans to buy a home with no down payment. Usually no down payment would mean having a monthly mortgage insurance premium in the payment, but not here. There is a one-time “funding fee” that goes towards the VA insurance fund, to cover lenders in case of your future foreclosure, and that is financed into the loan amount. Additionally, in some cases the Veteran is not allowed to pay for escrow fees or pest inspections or lender fees.

Inexperienced lenders don’t structure these loans well. They charge application fees and loan fees and underwriting fees and doc fees and etcetera. All those add up, and someone gets to pay for it: Either the buyer forks over more cash, or the seller makes less sale proceeds. It doesn’t have to be that way.

A quick look at a home costing $415,000 at current market rates shows that at my desk, if the seller were to pay $6000 as a closing cost credit to the buyer, it would cover everything! When we structure like this, the buyer gets their earnest money deposit back at close. Try as hard as I may, I can’t even find $11,000 in closing costs for a loan that size.

So many folks are stuck on the idea that a large national bank, Proudly Serving Military Members and their Families, has the best mortgage programs for veterans. Or that getting a Friendly, Fast, and Easy loan with America’s #1 online lender is better. Time and again that is not so when I compare offers.

Talk to your local Mortgage Advisor, folks. Pretty please, use the VA home loan program in a way that is of most benefit to your family in repayment for your dedicated military service.

Tammy Engel is your local Mortgage Advisor and she’s been working for your best interest since 1990. Contact her at (661) 822-7325 for help with purchase, refinance, and reverse mortgage. NMLS #235051/303625