For some home buyers who use VA loans, the closing process can seem like a mystery at first glance. This is especially true for first-time buyers who have never experienced the closing process before.
But while the VA loan closing process does involve a lot of important paperwork, it’s really not that complicated at all. Once you finish reading this article, any “mystery” surrounding this process will vanish.
Here are six things you can do to successfully navigate the closing process, when using a VA-guaranteed mortgage loan.
1. Understand the basics of the VA loan closing process.
In this context, the term “closing” refers to the final step in the home buying process. This is where homeownership officially transfers from the seller to the buyer. It’s like the finish line of a marathon you’ve been running since you first got pre-approved for a loan.
During closing, you will sign all of the finalized paperwork, pay for your closing costs (and possibly a down payment), and receive the keys to your new home. And some of this can be done digitally, by the way.
The VA loan program allows buyers to finance 100% of the purchase price, which eliminates the need for a down payment. But some borrowers choose to put some money down upfront in order to reduce the size of their monthly payments.
Closing costs are a different story. Nearly all home buyers who use a VA loan to purchase a house encounter closing costs. These are the different fees and charges that can accumulate during the mortgage and home buying process.
VA loan closing costs can vary due to a number of factors, but they typically range from 2% to 5% of the purchase price. For a median-priced ($350,000) home in 2024, these costs might range from $7,000 – $17,500. A more expensive home could bring even higher costs.
And that brings us to tip #2 for the VA loan closing process. Start saving money as soon as possible!
2. Start saving money for your various closing costs.
As you’ve just seen, the closing costs for a VA-guaranteed home loan can easily exceed $10,000 for an average-priced home. Because of this, you want to start saving money sooner rather than later. (Hint: today is a great time to start.)
Here are some tips to help you save up for the closing costs on your VA loan:
- Set a goal: Figure out how much you need to save and set a timeline. For starters, you can aim for 2% – 5% of the purchase price.
- Automate it: Schedule automatic transfers from your paycheck to a dedicated savings account.
- Cut expenses: Track your spending and identify areas where you can save, like eating out less or reducing your cable package. Every penny counts!
- Challenge yourself: Set savings milestones and reward yourself for reaching them.
3. Consider using gift money from an approved source.
Saving money can help you prepare for the VA loan closing process. But sometimes this is easier said than done. If you’re already on a tight budget, you might find it hard to put extra money aside each month.
In that case, you’ll be happy to know that family members and other approved donors can help you cover the closing costs associated with a VA loan.
The Department of Veterans Affairs allows borrowers to use gift money from family members, close friends, and even employers in some cases. This kind of financial help can greatly reduce your upfront out-of-pocket expense, clearing a path to closing.
4. Stay in touch with your loan officer throughout the process.
When you apply for a loan, you will probably have a “point person” who guides you through the rest of the process. Depending on the company’s business model, this might be a mortgage broker or a loan officer.
Mortgage professionals are usually fairly proactive, when it comes to communicating with their clients. But it never hurts to be proactive on your end as well.
In the weeks leading up to your VA loan closing date, staying in touch with your mortgage company point of contact to ensure they have everything they need. When it comes to complex financial transactions such as home loans, communication becomes the glue that holds it all together.
5. Make sure the escrow company has everything they need.
You’ll be working with other people as well, in addition to your broker or loan officer. For example, you will probably work with a title or escrow company that will finalize all of the paperwork needed for the closing process.
These professionals tend to be very proactive when it comes to “chasing down” documents and paperwork. But you can facilitate the process by reaching out to your title or escrow company a week or two before you’re scheduled to close. You can also use this opportunity to ask any preliminary questions you have about the closing process.
6. Ask questions before and during the VA loan closing process.
Some first-time home buyers who use VA loans feel nervous about asking a lot of questions. They might feel like they’re being a nuisance with all of their “newbie” questions, emails and phone calls. But you should never feel this way.
It’s your mortgage loan and your home purchase, and there’s a lot at stake. So you need to ensure that you understand every aspect of the process, before and during. Ask as many questions as you need. Mortgage professionals expect and encourage this kind of due diligence.