The VA home loan closing process can be long and a little complex, but it doesn't have to be confusing if you know what you're doing and understand the basics of the process. This post will discuss everything you need to know about closing your new home under the VA home loan program. Keep reading to find out more.
Reviewing Closing Paperwork
When closing a home loan through VA, your lender will provide you with documents for your review and signature. By law, your lender is supposed to provide you with copies of The Closing Disclosure before signing them. That way, you have time to review and understand what they mean before anything is official. In short, the paperwork is intended to ensure you know precisely what you're being offered and that you're committing to it willingly.
The HUD-1 Settlement Statement contains information about your settlement. It must be issued to you at least three business days before closing, but some states and lenders require that it be given to you earlier. The lender will provide you with a copy of the HUD-1 Settlement Statement. Please read it carefully, as there may be things on it that could affect your rights or affect how much money you owe at closing. You can call your lender or title company if you have any questions about anything in your HUD-1 settlement statement.
The Loan Estimate
Your lender will additionally provide you with a notice called a Loan Estimate. When you receive your Loan Estimate, ensure to read it carefully and compare it with what you expect to be your loan fees. The Loan Estimate will show an estimated loan cost breakdown but not the exact final costs. It gives you an idea of what closing costs are likely to be for your loan—and how those fees might affect you over time.
Along With your Loan Estimate, the lender will identify services related to closing that you can shop for and provide a list of potential companies to consider. This may include title companies, appraisers, real estate agents, home inspectors, and other professionals.
While lenders can’t recommend specific providers or give you pricing information for these services, they should provide you with contact information for at least two companies for each service category. This will help ensure that you have enough knowledge to shop around and find reputable professionals at fair and competitive prices.
That said, it's essential to note that most of your closing charges aren't allowed to change without the exception of the period between when you receive your Loan Estimate and the closing day. Some of these particular fees include:
- Transfer taxes
- Charges from the lender’s services like the origination fee
- Charges from the lenders’ affiliate
- Any outlay for which your lender doesn't permit you to shop for competing offers
Lender fees, third-party fees, discount points, and origination points may change. It's essential to know how these items will affect your loan. Third-party fees are real estate or settlement-related charges that aren't paid to your lender. These can include government fees, escrow or title company charges, and prepaid interest. Ask questions about any of these potential changes before signing any documents to avoid surprises at closing. Below are more charges that can swing without limit:
Title insurance and title services, especially if you don't use the companies identified by your lender.
Closing-related services you can shop for, especially if you don't use your lender's recommendations.
- Homeowners insurance charges
The Closing Disclosure Pages
The five-page disclosure document is exactly as it sounds like—they’re five pages in a single simplified form. This single form contains all of your lender's disclosures that you’ll use to sign closing documents that set up your loan. As you go through them one-by-one, you’ll discover each page is easier to understand. Let’s take a quick look at what each page entails:
The first page shows the changes of your estimated total monthly payment from your Loan Estimate.
The second page outlines a complete analysis of all closing costs.
The third page incorporates a table approximating the final cash-to-close calculation to the original digits from the Loan Estimate.
The fourth page contains additional detailed information about your loan.
- The firth and last page show you how much the loan will cost you over the complete span of your mortgage.
Note: In most cases, you'll receive two copies at closing; one copy is yours, and one stays with your lender. Do not sign until you're in front of your notary (or signing officer). Take care to review each page carefully as you fill out forms.
If you're looking to finance your home purchase through the VA Home Loan program, you should understand what you're signing up for. Fortunately, the VA Home Loan closing process is more streamlined than other mortgages. It's essential to understand the whole closing process to ensure everything runs effectively when it comes time to close on your home loan.