On a VA Loan, What Fees Can the Buyer Not Pay

By Bethany Eanes

Home loans guaranteed by the Department of Veterans Affairs are designed to assist homeowners who don't have a large sum of cash to put toward the purchase of a residence. VA loans minimize the upfront costs associated with a loan. While VA loans are available with small down payments, the borrower will still have to pay some fees in order to secure the debt.

The closing costs on a VA mortgage are the responsibility of a borrower. These costs include appraisal fees, recording fees, a credit report, a land survey fee, title insurance and mailing fees, to name a few. These fees may total up to 9 percent of a conventional home loan; but with VA loans the total is likely less -- around 3 to 5 percent. The VA allows the seller to pay up to 6 percent of closing costs on your loan.

The VA funding fee is required by law on all VA loans not using a down payment. This fee starts at 2.15 percent for first-time VA borrowers as of 2010. The funding fee may be higher on subsequent VA loans, and it may vary depending on the type of loan you are taking. For example, a VA refinancing loan to reduce interest rates carries a funding fee as low as 0.5 percent.

VA loans are available without down payments. If you elect to take a loan without a down payment, the funding fee mentioned in Section 2 is required. If you would like to make a down payment on your loan, you can reduce the fees and insurance required on the debt. You are also permitted to buy down the interest rate on a VA loan to make your loan more affordable by putting more cash into the loan up front.

Generally speaking, the less you pay up front on a mortgage, the more costly it will be in the long run. The down payment you choose not to pay on a VA loan is added to your mortgage. This makes your monthly payment higher and it may also increase the length of your loan. Ultimately, if you have cash to make a down payment on your VA home loan, you can save yourself money in the long run.

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