Comparing a VA Loan Broker and Lender

A VA loan broker is not involved in actually providing you with financing. Whenever you see the word "broker" in an employment title, the individual assisting you is acting as an intermediary. The broker will help you find a lender, and they may even provide valuable advice on picking the best loan options. Some brokers are affiliated with individual lenders. Others may even specialize in VA home loans. However, you should know that a broker's fees are not authorized in closing costs for a VA home loan.

Broker's Fees

When you use a broker, the broker will typically assess fees in one of two ways. The first way is to have a flat fee. This is not as common because it will typically offer a lower total reward than the other option. The second option is to charge a commission based fee. The word commission may not be directly used, but it is essentially how the fee scale would work. The broker will assess a part of the total mortgage you achieve, such as one or two percent, as their fee. This can be troublesome because it gives the broker a reason to push you toward a larger loan.

Lender's Fees

A lender will charge closing cost fees not associated with broker's fees. These fees are used to file a lien with the county registrar, processing paperwork and the salary of an individual who spends time working with you on the loan. The closing costs on a mortgage can vary from three to five percent in most cases, and anything higher may be considered predatory and too high. You can lower closing costs by preparing your documents carefully and doing as much as you can on your own, but closing costs will always be part of a mortgage.

VA Home Loan Approved Fees

Closing costs on a loan are approved by the VA. These costs, however, are subject to given rules. A list of acceptable closing costs can be provided to you. It may be extended to include fees regularly charged to borrowers in your jurisdiction. In no circumstances, though, will a broker's fees be approved on a VA home loan. This falls into the category of fees not approved including photograph fees, paperwork fees and attorneys fees. 

Paying Broker's Fees on a VA Home Loan

Your broker's fees cannot be added to your VA home loan. Therefore, if you choose to use a VA home loan broker instead of working directly with a lender, you will  have to pay the fees out of pocket. Some borrowers think this will be worth the added expense because they will ultimately save money on the loan. A broker can help you secure lower financing costs and a better mortgage as a whole. Many borrowers will find they could have found a beneficial loan, especially with the VA home loan guaranty, if they had looked for a loan without using a broker at all. Many brokers find the same things that borrowers could have found on their own.

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