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How to Roll in the Closing Costs on a VA Home Loan
Four Minute Read
Written by Ed Andrews III on April 9th, 2020
How Can You Roll Closing Costs into a VA Loan
Easy.....if you’re refinancing your home, you can just tell the lender that you’d like to include the VA loan closing costs into the loan. If you are purchasing a home, you can’t roll in the closing costs. 

But you can negotiate who pays closing costs on a VA loan. The seller will almost always agree to pay the VA closing fees if you increase your offer price by the amount you wish for them to pay.

Rolling in Closing Costs VA Loan Style

There’s only one major loan program that will let you roll in your closing costs when buying a home, and that product is the USDA home loan. But these loans are reserved for people buying homes in rural areas. And only when the home’s appraised value exceeds what the buyer has contracted to buy it for.

So what does every veteran do that wants to buy a home, but either doesn’t want to or can’t come up with the cash to cover closing costs for a VA loan. Easy....they have the seller pay for it.  

For VA loan closing costs who pays is completely optional. Which begs the question…..”Why would the seller agree to pay my closing costs?” For that question I have yet another easy answer, because you’re going to pay them more money for the house.

Let’s talk about how this would work. Suppose I’m selling my house for $250,000. Obviously that’s how much I want for the house if that’s what I’m selling it for. If you send me an offer to buy my home for my asking price, but I have to pay $8,000 towards your VA closing cost; what are you really offering me?

In actuality you’re not offering me my asking price of $250,000. What you’re really offering me is $242,000. Because I would immediately have to kick $8,000 of the total $250,000 I’m receiving towards your closing costs. 

For the record that figure of $8,000 is not an abnormal amount for closing costs for VA loan applicants, in fact they can easily exceed that amount.

If I wanted to sell my house for $242,000 I would have listed it for that. So how do we make sure I net the amount of money I want for my house, and you get $8,000 paid towards your closing costs VA financing carries? Easy, you offer me $258,000 for the house.
That may sound crazy to you, but it’s done everyday. There’s no law or restriction against offering more than list price for a property. In this example, at $258,000 I can pay $8,000 of your VA home loans closing costs and still walk away with the $250,000 I wanted for the house.

Since you’re using the VA program that doesn’t require a down payment, you’ll now be borrowing $258,000 as opposed to $250,000. Guess what you just did? Yep....rolled in the closing costs. On VA transactions it can be tricky, but this generally does the trick.

So often when veterans ask do you pay closing cost with a VA loan, I respond by telling them “Does a VA loan have closing costs” is the wrong question. A better question is, “With a VA loan who pays closing costs?” And as you can see from the example above this can be negotiated. For veterans looking to buy a home this may be the only VA loan no closing cost option.

Depending on the part of the country you live in, there are VA closing costs assistance options

 But be mindful that using these programs may have adverse impact on your interest rate. They may also carry some additional terms that prove to be unfavorable.
Now look, don’t just give money away. Listen to your real estate agent, and know if you’re in a buyer’s market or a seller’s market. If homes aren’t selling quickly you may be able to get the seller to agree to pay for your closing costs without offering them any extra money for the home. 

There’s some closing cost VA doesn’t allow the veteran to pay to begin with

Conversely, if it’s a seller’s market you may very well have to extend an offer price equal to the list price plus the amount you need the seller to pay towards closing. As long as the home appraises for the contracted price this works like a charm.
The good news is the appraiser will get a copy of the contract before going out to the property. They still have to justify their opinion of value with hard data. However, them knowing what our contract price is can help them establish the value where we need it. Afterall, a home is worth what someone would theoretically be willing to pay for it. The contract price is a good indication of what that amount may be.

Closing costs and VA loans are a mystery to many veterans, so hopefully this gives you some insight on how to navigate the two.

This all leads to the next big question, what all can the seller pay for. Well make sure you watch my video “what fees does the seller pay on a VA loan?” 
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About the Author:
Ed Andrews III

Ed Andrews III is a mortgage loan officer, and U.S. veteran of the Iraq & Afghanistan Wars. He is an expert on VA home loans, and dedicated to helping veterans achieve home-ownership.
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