Final answer:
VA loan closing costs typically include a funding fee, appraisal, title insurance, credit report, and other third-party fees. Sellers can contribute to these costs, and there may be additional allowable costs sellers can cover. These costs vary by lender and location but are an important aspect to consider when budgeting for a home purchase.
Step-by-step explanation:
The closing costs for a VA loan can vary, but typically include a variety of fees. While the VA loan program is known for its no down payment benefit, there are still closing costs which typically include a VA funding fee, appraisal fee, title insurance, credit report fee, and other third-party fees. The VA funding fee is a one-time fee on the loan that goes directly to the Department of Veterans Affairs to help cover losses on the few loans that go into default and keep the loan program running.
In addition to the VA funding fee, borrowers may have fees for a home inspection and closing costs that may include charges for loan origination, an appraisal, title insurance, and more, which can vary by lender and location. Moreover, the seller can pay for some of the closing costs on the buyer's behalf, subject to a negotiable percentage of the loan amount. There are also additional VA loan costs that a seller is allowed to pay beyond the allowable closing costs. It is important for potential VA loan borrowers to understand these costs when planning their budget for a home purchase.