If you have a VA loan that you want to refinance, you have a few good options at your disposal. If you are just trying to get a lower rate and/or change your loan’s term, the VA IRRRL program may be a good option. You only have to verify that you make your mortgage payments on time and that you benefit from the refinance. It’s simple and affordable. If you want to take cash out of your home’s equity, you can use the flexible VA cash-out refinance. For this loan, you’ll have to verify that you qualify for the loan by proving your income, employment, and credit, but it’s still a flexible loan program.
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Just how much does it cost to use either of these refinance programs, though?
Just as the VA purchase loan cost you less than any other loan program would probably cost, the same is true for the VA refinance. The VA keeps the closing costs low for veterans to make it affordable for them to refinance their loan.
The Funding Fee
The one fee that any veteran will pay no matter which lender they use is the
VA funding fee. You’ll pay this fee every time you take out a VA loan. The only exception to the rule is if you were rendered disabled as a result of your time in the service. This could have occurred while you were on active duty or after the fact, but the VA recognizes that it was a result of your service. If this is the case, you won’t pay a funding fee at all.
If you do have to pay a funding fee though, you’ll pay either of the following on your refinance:
- 5% of the loan amount if you use the VA IRRRL program
- 15% of the loan amount if you use the VA cash-out refinance
The Other Closing Costs
On top of the funding fee, you’ll likely pay
other closing costs that are charged by the lender, title company, appraiser, and any other third-parties involved in the process.
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While we can’t pinpoint the exact fees that every lender will charge, we can give you a ballpark figure of what you should expect:
- Origination fee – Many lenders charge this fee for processing your loan. Typically, VA lenders charge 1% of your loan amount for the origination fee.
- Discount points – If you want to get a lower interest rate, you may buy it down by paying discount points. The amount of points you pay (percentage of your loan amount) depend on the lender and how much you want to lower your rate.
- Title fees – Each title company has different fees. If you use the same title company you used when you bought the home, you may be able to secure lower title fees. If you use a new title company, you can pay as much as $2,500 for the title search, title report, and title insurance.
- Appraisal – If you refinance with the cash-out refinance, you’ll have to pay for a new appraisal, which can usually run you around $300 – $500.
- Credit report fee – If the lender has to pull your credit, they will usually pass the fee to do so onto you. The typical credit report costs anywhere from $25 – $50.
The actual fees to refinance your VA loan will depend on many factors including the chosen lender, the qualifying factors you present, and the chosen third parties involved in the process. You are free to negotiate any of these fees with the lender to try to get them lower. You can also shop around to find different lenders and compare their options with what you’ve been given.
If you don’t want to pay any closing costs, you can also discuss a no-closing-cost loan with your lender. Lenders typically charge you a higher interest rate in order to pay your closing costs for you. The difference is usually 0.5% in your interest rate, but it can mean you don’t have to bring any money to the closing.
Make sure to choose the costs that fit within your budget and that make the most sense for your refinance. Don’t just refinance to get a lower rate; make sure the new loan makes sense for your situation and your future plans for the home.
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