Closing Costs for VA Mortgages in Pennsylvania and the rest of the nation differ somewhat from the closing costs associated with other types of mortgage financing. The Department of Veterans Affairs only allows the Veteran to pay certain costs known as Allowable Closing Costs.
The VA has restricted closing costs in the interest of protecting the veteran from excessive charges. Any costs that are not considered an Allowable Closing Cost have to be covered by the seller or the lender on a purchase transaction or they can not be charged at all.
In a VA mortgage transaction, the Seller can pay all the Buyer's closing costs without limit as long as the costs are considered reasonable and customary.
Allowable Closing Costs for a VA Mortgage
VA Funding Fee : This is charged by the VA to maintain the VA home loan program. This amount varies according to the eligibility status of the Veteran, the percentage of the down payment or equity and any previous use of the VA Entitlement. The amount required for Funding Fee can be found here
Discount Points : the veteran can choose to buy down the interest rate on the loan using Discount Points
Appraisal Fee
Recording Fee : to record the mortgage and deed with the local county
Credit Report
Prepaid Items : amount needed for escrow and any prorated amount of property taxes or assessments due at closing between buyer and seller
Homeowners Insurance
Flood Insurance : if needed
Survey
Title Examination/Title Insurance : to insure the title of the property is free of any previous liens
Local Fees : These are fees specific to the local government where the property is located. Pennsylvania has a 1% state transfer tax. In addition, there is also a local transfer tax that can vary by local municipality. Typically the local transfer tax is also 1% but this can also be vary, so make sure to check on this. Philadelphia, Pittsburgh and some other of the larger cities tend to have higher local transfer taxes. This tax is based on the sales price of the transaction and is usually split evenly between buyer and seller.
The fees listed above as Allowable Closing Costs must be deemed reasonable and customary by the VA in order to be charged.
Comments(3)