Orange County, CA – The fees that veteran’s can pay to obtain a loan are limited by the VA. Which VA loan fees a borrower can and can’t pay is often a subject of debate. VA loans can be structured differently. The VA even allows other parties to pay specific fees. With a variety of combinations available for structuring the VA loan fees, it can get confusing. In simple terms the veteran can pay:
- All reasonable and customary amounts for the “Itemized Fees and Charges” designated by VA, plus
- a one percent flat charge by the lender, plus
- reasonable discount points.
Loan Fees the Veteran-Borrower Can Pay
The veteran may pay any or all of the following itemized fees and charges in amounts that are reasonable and customary.
|Appraisal and Compliance Inspections||
|Recording Fees||The veteran can pay for recording fees and recording taxes or other charges incident to recordation.|
|Credit Report||The veteran can pay for the credit report obtained by the lender.|
|Prepaid Items||The veteran can pay that portion of taxes, insurance, interest, assessments, and similar items for the current year chargeable to the borrower and the initial deposit for the tax and insurance account.|
|Hazard Insurance||The veteran can pay the required hazard insurance premium. This includes flood insurance, if required.|
|Flood Zone Determination||The veteran can pay the actual amount charged for a determination of whether a property is in a special flood hazard area, if made by a third party who guarantees the accuracy of the determination. Flood certificates are commonly issued by 3rd party providers.A fee may not be charged for a flood zone determination made by the lender or a VA appraiser.|
|Survey||The veteran can pay a charge for a survey, if required by the lender or veteran. Any charge for a survey in connection with a condominium loan must have the prior approval of VA.|
|Title Examination and Title Insurance||The veteran may pay a fee for title examination and title insurance, if any. If the lender decides that an environmental protection lien endorsement to a title policy is needed, the cost of the endorsement may be charged to the veteran.|
|Special Mailing Fees for Refinancing Loans||For refinancing loans only, the veteran can pay charges for Federal Express, Express Mail, or a similar service when the saved per diem interest cost to the veteran will exceed the cost of the special handling.|
|VA Funding Fee||Unless exempt, each veteran must pay a funding fee to VA.|
|Mortgage Electronic Registration System (MERS) Fee||The veteran may pay a fee for MERS. MERS is a one-time fee for the purpose of electronically tracking the ownership of the beneficial interest in a loan and its servicing rights.|
|Other Fees Authorized by VA||Additional fees attributable to local variances may be charged to the veteran only if specifically authorized by VA. The lender may submit a written request to the Regional Loan Center for approval if the fee is normally paid by the borrower in a particular jurisdiction and considered reasonable and customary in the jurisdiction.|
Lender’s 1% Flat Charge
In addition to the “itemized fees and charges,” the lender may charge the veteran a flat charge. This fee can’t exceed one percent of the loan amount. The lender’s flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as “itemized fees and charges.” If a one percent origination fee is not charged, the unallowable fees below can be charged and itemized, but cannot exceed one percent of the purchase price.
This allows buyers to structure the VA loan fees in a manner that best suits their needs. The loan amount an dpurchase price will determine which direction is best. If the loan amount is larger then it would make more sense to pay the fees instead of 1%. Conversely, of the loan amount is smaller it would make more sense to pay the 1% flat charge. Or you may not want to pay either of these. Further below you will see how the VA allows other to pay these on your behalf.
The following list provides examples of items that cannot be charged to the veteran as “itemized fees and charges.”
- lender’s appraisals
- lender’s inspections, except in construction loan cases
- loan closing or settlement fees
- document preparation fees
- preparing loan papers or conveyancing fees
- attorney’s services other than for title work
- interest rate lock-in fees
- postage and other mailing charges, stationery, telephone calls, and other overhead
- amortization schedules, pass books, and membership or entrance fees
- escrow fees or charges
- notary fees
- commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser
- trustee’s fees or charges
- loan application or processing fees
- fees for preparation of truth-in-lending disclosure statement
- fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and
- tax service fees.
Fees and Charges the Veteran-Borrower Cannot Pay
- Attorney’s Fees – The lender may not charge the borrower for attorney’s fees. VA does not intend to prevent the veteran from seeking independent legal representation. Therefore, the veteran can independently retain an attorney and pay a fee for legal services in connection with the purchase of a home.
- Brokerage Fees – Fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the veteran-purchaser. While use of “buyer” brokers is not precluded, veteran-purchasers may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals. Since information on property available for purchase and financing options is widely available to the public from a variety of sources, VA does not believe that preventing the veteran from paying buyer-broker fees will harm the veteran.
- Prepayment Penalties – A veteran obtaining a VA refinancing loan cannot use loan proceeds to pay penalty costs for prepayment of an existing lien. A veteran purchasing a property with a VA loan cannot pay penalty costs required to discharge any existing liens on the seller’s property.
- Subordination Prep/Sub-Escrow Fees – These fees are usually charged by closing/escrow agents or third parties to process subordination are never permitted to be charged.
- Termite/Pest Inspection – Not allowed on purchase transactions.
- HUD / FHA Inspection Fees for Builders – 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.
Who Can Pay the VA Loan Fees?
If the veteran can’t pay these fees and some of the others, then who does? VA regulations limit charges “made against or paid by” the borrower. They do not limit the payment of fees and charges by other parties. The seller, lender, or any other party may pay fees and charges, including discount points, on behalf of the borrower. Therefore, these VA loan fees become negotiable. They are commonly paid by the seller. However, seller concessions cannot be excessive. They are limited to 4% of the purchase price.
You can see there are a variety of options available for structuring VA loan fees. Your lender can help you decide which structure is best you. If you need help structuring your VA loan click here to contact me. I’ll be happy to help!