VA Non-Allowable Fees: What Fees You Don’t Pay

VA Non-Allowable Fees:

Purchasing a home can come with a hefty sum in closing costs. However, if you’re opting for a VA loan, there are specific regulations regarding the fees lenders can impose on you. Fortunately, numerous VA non-allowable fees exist to help manage and reduce your closing expenses.

Here’s essential information on these fees when buying a home with a VA loan.

What Exactly Are VA Non-Allowable Fees? 

The U.S. Department of Veterans Affairs backs VA loans, aiming to make home buying more affordable for veterans. Consequently, the VA diligently oversees the fees that veterans are required to pay during the closing phase.

VA non-allowable fees refer to the charges that the department prohibits lenders from passing on to borrowers at closing. Those who secure a home through a VA loan will not be subject to these non-allowable fees during the closing process.

How Do Non-Allowable Fees Work With a VA Loan? 

In the realm of home loans, closing with a VA loan typically means encountering fewer fees than with conventional loans. For VA loans, lenders are permitted to charge a 1% mortgage origination fee.

This singular fee is designed to cover various lender expenses, including escrow fees, tax service fees, document preparation fees, and loan application fees.

The advantage of this 1% flat fee is its predictability for borrowers, helping them anticipate the total fees due at closing without unexpected charges.

Can Sellers Pay VA Non-Allowable Fees? 

VA loans come with precise rules regarding the fees that purchasers are responsible for. If a cost is classified as a VA non-allowable fee, it must be paid by another party, which could be the seller, lender, or real estate agent in certain instances.

It’s worth noting that sellers who pay these non-allowable fees might incorporate these costs into the home’s selling price, indirectly passing the expense back to the buyer.

Understanding VA Allowable and Non-Allowable Fees 

As a VA loan applicant, it’s crucial to know which fees are permissible and which are not. Here’s an overview:

Permissible VA Fees:

• VA funding fee: A one-time payment to the Department of Veterans Affairs to support the VA loan program.
• VA appraisal fee: Necessary to assess the home’s value.
• Credit report fee: Typically under $50, for obtaining your credit history.
• Origination fee: Either a flat 1% of the loan amount or an itemized list of allowable costs.
• Title insurance: Protects both lender and buyer against property claims.
• Recording fee: For officially transferring property ownership.
• Discount points: Reasonable amounts can be paid to lower interest rates.
• Flood zone determination fee: For assessing flood risk.
• Mailing fees for refinancing: Covers mailing costs related to refinancing paperwork.

Non-Allowable VA Fees:

• Real estate attorney, broker, and agent fees: These costs cannot be passed to VA loan borrowers.
• Application fees: Lenders cannot charge application fees.
• Escrow setup fees: Setting up an escrow account should incur no fees.
• Rate lock fees: Prohibited.
• Additional appraisals or inspections requested by the lender.

If you face any disallowed fees, reaching out to the Department of Veterans Affairs is advisable.

The Essence of VA Non-Allowables 

VA non-allowable fees ensure veterans don’t bear excessive costs during closing. The 1% origination fee cap allows lenders to cover their operational costs while making the closing process more affordable for VA loan borrowers.

For those considering a VA home loan, applying online with Elevation Mortgage is an available option.