VA Loan Fees: What Borrowers Cannot Be Charged

There are a variety of fees and expenses you will need to budget and save up for when planning your VA home loan. Those fees include appraisals, pest inspection fees, flood zone determination fees (where they apply), the VA loan funding fee, home inspections, and more.

But the VA loan rulebook has a list of instructions to the lender regarding fees the borrower CANNOT be charged. Do you know what they are?

The VA Lender’s Handbook, also known as VA Pamphlet 26-7, instructs the lender on fees in Chapter Eight. One fee that is permitted is known as the Lender’s Flat Fee. This fee covers the financial institution’s costs of doing business on your VA home loan.

The flat fee is separate from the appraisal fee, other closing costs, etc. But Chapter Eight makes it clear that there are things intended to be covered by the lender’s flat fee that should not be billed a second time to the borrower in itemized fees and charges. The flat fee is intended to cover such things, and Chapter Eight is designed to prevent those fees from being billed twice in the itemized portion of the borrower’s expenses.

For example, the lender’s legal fees can’t be billed to the borrower. Nor can the brokerage fees charged by a real estate broker or agent. Chapter Eight also instructs the lender, “A veteran purchasing a property with a VA loan cannot pay penalty costs required to discharge any existing liens on the seller’s property.”

What else cannot be itemized and charged to the borrower? Tax service fees, interest rate lock-in fees, notary services, escrow fees, and document prep fees. These expenses are covered by the lender’s flat charge and may not be itemized as an expense payable by the borrower on an individual basis. And then there are circumstantial issues that need additional consideration. For example, Chapter Eight states:

“In proposed construction cases in which the dwelling was constructed under the Department of Housing and Urban Development (HUD) supervision, the cost of any inspections or re-inspections must be borne by the builder or sponsor and are not chargeable to the veteran-purchaser. This includes:

•re-inspections by VA or HUD of onsite or offsite work for which an escrow agreement was established, and
•any additional re-inspections deemed necessary by VA to assure conformity with VA regulations.”

As you can see, VA loan rules are designed to protect borrowers from additional fees or fee stacking. If you need further clarification on the nature of your itemized fees and expenses, ask your lender to discuss your transaction and the HUD-1 settlement statement with you to see what kinds of itemized charges you can expect when your loan is approved.

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