VA Non-Allowable Fees
Who covers these costs when Veterans cannot pay them.
Using a VA loan? There are closing costs you are not allowed to pay.
The VA maintains a list of prohibited fees to protect Veterans from overcharges.
These fees don’t disappear. Someone else has to cover them.
This article is for Veterans buying a home in Colorado or Florida.
By the end, you’ll know which fees are off-limits, who pays them, and what changed recently.
We’ll also cover what to catch on your Loan Estimate before problems reach the closing table.
In This Article
What Are VA Non-Allowable Fees?
VA non-allowable fees are specific closing costs the Department of Veterans Affairs prohibits Veterans from paying. These rules exist to stop lenders and other parties from adding extra charges on top of what the program already allows. The list sets a clear limit on what a Veteran can be asked to pay at closing.
The VA has guaranteed more than 29 million home loans since 1944, according to a VA press release from August 2025. That reach gives the VA real influence over how lenders behave. The non-allowable fee list is one of its most direct tools. Some fees are allowed. Others are strictly off-limits. The table below shows the difference.
| Allowable Fees (Veteran Can Pay) | Non-Allowable Fees (Veteran Cannot Pay) |
|---|---|
| VA appraisal fee | Loan processing or underwriting fees |
| Credit report fee | Document preparation fees |
| Recording fees | Attorney fees (unless for title work) |
| Hazard insurance | Escrow and notary fees for closing |
| VA funding fee | Rate lock-in fees |
| Title insurance | Postage, courier, and tax service fees |
| Survey fees | Appraisals ordered by anyone other than the lender or VA |
| Origination fee (up to 1%) | Prepayment penalties on a prior loan |
The non-allowable list covers most of the overhead lenders generate during the loan process. Document prep fees, processing charges, and courier costs are real expenses. But under VA loan rules, the lender absorbs those rather than passing them to the Veteran. That’s one of the main reasons VA loans often cost less to close than conventional loans for the same borrower.
For a full overview of the program, the VA’s housing assistance page publishes detailed guidance on eligibility and loan benefits.
How VA Closing Cost Rules Shield Veterans from Extra Charges
VA guidelines cap lender origination fees at 1% of the loan amount. A lender can charge this as a single flat fee, or itemize specific allowable costs, as long as the total stays within that 1% ceiling. Either structure is permitted.
In FY2024, the VA guaranteed purchase loans totaling $114.1 billion, according to the VA’s FY2024 Annual Benefits Report. At that volume, the 1% origination cap has real dollar impact on real people. On a $350,000 loan, it limits lender origination charges to $3,500. On a $500,000 loan, the ceiling is $5,000. The cap keeps those charges predictable no matter how the lender labels or structures them.
The non-allowable list and the 1% cap work together. Without the non-allowable list, a lender could charge a 1% origination fee and then stack document prep fees, processing fees, and courier charges on top. The non-allowable list closes that gap. It stops lenders from working around the cap by renaming the same costs.
What the 1% Cap Does Not Cover
The cap applies only to what the lender charges directly. It does not limit all closing costs. Veterans can still pay allowable third-party fees such as the VA appraisal, title insurance, recording fees, and hazard insurance. These fall outside the origination cap and are not subject to the same limit.
So total closing costs on a VA loan can exceed 1% of the loan amount. The cap restricts lender charges only. Third-party costs are separate, and they add up. We often see buyers assume that a VA loan caps all their closing costs at 1%. That’s not how it works. The cap targets lender fees only. Knowing this difference changes how you plan for closing day.
What This Means for Your Situation
If you’re comparing Loan Estimates from multiple VA lenders, the 1% cap means origination charges should look similar across quotes. If one lender’s charges run noticeably higher, ask them to walk through each line item. A non-allowable fee on a Loan Estimate is a red flag worth resolving now, not after the Closing Disclosure arrives three business days before closing.
Who Pays Non-Allowable Fees When the Veteran Can’t?
When a non-allowable fee shows up in a VA transaction, it doesn’t go away. Someone else has to cover it. There are two main options: the seller pays through concessions, or the lender absorbs the cost through a credit.
Seller Concessions
VA guidelines allow sellers to contribute up to 4% of the loan’s reasonable value in seller concessions. On a $400,000 purchase, that’s up to $16,000 the seller can put toward the Veteran’s closing costs. These concessions can include non-allowable fees along with other costs. How much a seller is willing to pay depends entirely on the market. Asking for concessions during negotiation is a real strategy, not just a formality.
In competitive Colorado markets like Colorado Springs and Denver, sellers often push back on concession requests. Veterans working with a Colorado mortgage broker who handles VA transactions regularly may need to pick their battles. Some non-allowable fees are easier to push to the seller. Others make more sense to let the lender handle through a credit. In some Florida markets near military bases, sellers are more familiar with VA transactions and more willing to negotiate. Veterans working with a Florida mortgage broker who knows those local patterns can make that negotiation more targeted.
Lender Credits
If the seller won’t cover a non-allowable fee, the lender can issue a credit at closing. This appears as a line item on the Closing Disclosure. The CFPB requires lenders to disclose credits clearly on the Closing Disclosure, so you can verify it before you sign. If a non-allowable fee shows up without a matching credit, that’s an error. Your lender needs to fix it before you sign anything.
This is exactly where a lender who handles VA loans regularly proves their value. They should catch non-allowable fees before the Closing Disclosure goes out, not after you’re sitting at the closing table.
Spotting a VA Non-Allowable Fee Before It Reaches the Closing Table
A Veteran buyer in Colorado Springs was three days from closing when they reviewed their Closing Disclosure carefully. A $395 charge appeared on the document, labeled as a “transaction fee” from their real estate agent.
The lender had not flagged it. The agent had added the charge without discussing it during the contract phase. Under VA rules, an agent admin fee charged to a Veteran buyer is non-allowable regardless of how it is labeled on the paperwork.
The buyer called their loan officer. The lender issued a credit to offset the charge, and the transaction closed on time. That outcome depended entirely on the buyer knowing what to look for before they signed.
The Agent Fee Warning Every VA Buyer Should Know
Some real estate agents charge an administrative fee on top of their commission. It might appear on paperwork as a “transaction fee,” a “processing fee,” or an “admin fee.” It’s usually a few hundred dollars. Under VA rules, the Veteran buyer cannot pay it.
The problem surfaces when agents ask the lender to relabel the fee so it looks like something else on the paperwork. The VA does not allow this. If your agent charges anything beyond standard commission, the seller must cover that charge or it needs to come off the transaction entirely. There is no version of that fee the Veteran can legally pay on a VA loan.
“Agent admin fees are one of the most common non-allowable charges I see try to slip through on a VA transaction. An agent calls it a transaction fee, the lender doesn’t flag it, and suddenly it’s sitting on the closing disclosure waiting for someone to catch it. Veterans should ask their agent upfront if they charge anything beyond commission, and get the answer in writing.”
— Reed Letson, Owner, Elevation Mortgage
Before signing a buyer’s agent agreement, ask directly: “Do you charge any fee beyond your commission?” If the answer is yes, get the details in writing. Share that information with your lender early. A lender who handles VA loans regularly will catch the issue before it shows up as a closing-day problem.
What Changed in 2022 and 2024
The non-allowable fee list is not fixed. The VA has updated it twice in recent years, both times in response to real-world situations where the old rules were creating problems for Veterans. Both updates expanded what Veterans can pay, in specific circumstances.
2022: Termite Inspections
Before 2022, pest inspections were generally off-limits for Veteran buyers to pay. The VA updated that guidance to allow Veterans to pay for a wood-destroying insect inspection when the Notice of Value requires it as a condition of the loan. If the appraisal conditions the purchase on a pest report, the Veteran can now pay for it directly. The seller or lender can still cover it, but the choice now belongs to the buyer rather than being forced on the seller.
2024: Buyer’s Agent Commissions
For decades, buyer’s agent commissions were non-allowable. Veterans could not pay their buyer’s agent directly. That changed in August 2024, when the VA issued guidance allowing Veterans to pay reasonable and customary buyer-agent fees at closing. The change came in direct response to the National Association of Realtors settlement, which eliminated the requirement for sellers to offer buyer-agent compensation through MLS listings.
Before that update, VA buyers faced a difficult situation. Sellers were no longer required to cover buyer-agent fees, but VA rules still blocked Veterans from paying them directly. The 2024 guidance resolved that conflict and kept VA buyers competitive in the market.
Two details matter here that most articles leave out. First, buyer-broker fees cannot be financed into the VA loan. They require cash at closing. On a $400,000 purchase with a 2.5% buyer-agent fee, that’s $10,000 in cash on top of other closing costs. Budget for this early if there’s any chance the seller won’t cover it. Second, this rule change is a temporary policy measure. The VA has not yet issued permanent guidance. The practical approach stays the same: negotiate for the seller to cover agent compensation in every offer, and treat buyer-paid commission as the fallback.
Because this update is recent, not every lender or agent has caught up. If someone tells you that agent commissions are always non-allowable on a VA loan, that information is outdated. This is one of several reasons why working with a lender who stays current on VA guidelines matters for this specific loan type. Our page on VA mortgage approval factors covers the broader picture of what lenders look at on these transactions.
Run the Numbers Before You Start Shopping
Our first-time buyer tools let you estimate your payment, check affordability based on your income, and compare loan options side by side — before you ever talk to a lender.
Open the First-Time Buyer ToolsCommon Mistakes Veterans Make with Non-Allowable Fees
Assuming Non-Allowable Fees Won’t Appear on Your Documents
Veterans sometimes think that if a fee is non-allowable, it simply won’t show up on their closing paperwork. It often does appear. The difference is that a lender credit or seller concession should offset it. If you see a non-allowable fee without a matching credit on your Closing Disclosure, that’s an error. Do not sign until your lender has corrected it.
Waiting Until the Closing Disclosure to Review Fees
The Closing Disclosure arrives three business days before closing. That’s not the right time to discover a problem. Your Loan Estimate, which you receive early in the process, shows the same fee structure. Reviewing it with your lender early gives you time to correct errors without putting the closing date at risk.
Choosing a Lender Without VA Experience
Not every lender handles VA loans regularly. A lender who mostly processes conventional or FHA loans may not recognize non-allowable fees or catch them before they appear on your documents. In our experience working with Colorado and Florida Veterans, this is where most errors come from — not from intent, but from unfamiliarity with VA-specific guidelines.
Questions to Ask Your Lender About VA Fees
- Can you walk me through my Loan Estimate and identify which fees are VA non-allowable?
- Are you charging a flat 1% origination fee, or itemizing specific costs? What’s included in that charge?
- If a non-allowable fee appears, will you issue a lender credit, or do we need to negotiate that with the seller?
- My agent charges a transaction fee beyond their commission. How does that get handled on a VA loan?
- If the seller won’t cover my buyer’s agent fee, can I pay it directly? Does that require cash at closing?
- How many VA loans do you close per month? (This tells you how current they are with VA-specific guidelines.)
Find Out What Actually Drives Your Approval
Credit score is just one piece. Income, debt, assets, and loan type all factor in. Our approval guide breaks down what lenders actually look at and what you can do about it.
See What Affects Your ApprovalFrequently Asked Questions
VA non-allowable fees are specific closing costs the Department of Veterans Affairs prohibits Veterans from paying directly. Common examples include loan processing fees, document preparation charges, attorney fees not related to title work, and escrow fees. These costs must be covered by the lender or the seller instead of the Veteran.
Either the lender or the seller covers non-allowable fees. Sellers can contribute up to 4% of the loan’s reasonable value in concessions, which can include these charges. If the seller won’t pay, the lender typically issues a credit on the Closing Disclosure to offset the fee. In either case, the cost does not fall on the Veteran.
Yes. In August 2024, the VA issued guidance allowing Veterans to pay their buyer’s agent commission directly at closing. Before this change, buyer-agent fees were non-allowable. The update responded to the National Association of Realtors settlement, which ended the requirement for sellers to offer buyer-agent compensation through MLS listings. The fee must be paid in cash at closing and cannot be financed into the loan. This guidance is currently a temporary policy measure; the VA has not yet issued permanent rules.
Do not sign until the issue is resolved. Contact your loan officer and ask them to issue a lender credit for the amount or arrange for the seller to cover it. The CFPB requires lenders to disclose all credits clearly on the Closing Disclosure, so any non-allowable fee without a matching credit needs to be corrected before closing. This is why reviewing your Loan Estimate early in the process matters so much.
Not if the Veteran is being asked to pay it. Agent admin fees charged on top of standard commission are non-allowable. If your agent charges one, the seller must cover it or it needs to be removed from the transaction. Ask your agent before signing any agreement whether they charge anything beyond their commission, and get the answer in writing.
