Who Pays the VA Non-Allowable Fees?

VA Non-Allowable Fees

VA Non-Allowable Fees

Arizona VA home loan rules prohibit veterans from paying certain home loan costs in certain states.   The VA has categorized these as “VA Non Allowable Fees”.   VA Non-Allowable Fees differ depending on how a lender structures the loan costs.   VA Non-Allowable fee rules also vary from state to state.

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How Much are VA Non-Allowable Fees?

The answer depends on how the veteran’s lender structures the loan costs.  First, VA loans with a 1% origination fee have one set of Non Allowable fees.  Second, VA loans without a 1% origination fee have a different set of Non Allowable fees.  Let’s dig in a little deeper:

1. VA Non-Allowable Fees when Lender Charges 1% Origination Fee:

When a lender charges a 1% origination fee the VA Non-Allowable fee list is longer.  The VA limits how much the veteran is paying in overall closing costs.  As a result, veteran’s paying a 1% origination fee may not pay several other home loan fees.

In contrast, when a lender does not charge a 1% origination fee the VA Non-Allowable Fee list is shorter.  This is due to the fact that the veteran has not already paid a 1% origination fee.  As a result, the VA allows the veteran to paying additional closing costs.

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Sample VA Non-Allowable Fees when VA lender charges 1% origination fee:

  • 2nd appraisal
  • non-appraiser required lender ordered inspections
  • Settlement fee/escrow fee
  • Document prep fee
  • Underwriting fee
  • Processing fee
  • Non up front application fee
  • Truth in lending fee
  • Mortgage broker fee
  • Termite/Pest inspection fee
  • Attorney fees
  • Email fee
  • Photograph fee
  • Postage fees if not a cash out refi or a streamline refi
  • Notary fee
  • Commitment fee
  • Trustee fee
  • Tax Service fee

VA Non-Allowable Fees Total when a 1% origination is charged:  +/- $1400 in Arizona

2. VA Non-Allowable Fees when Lender Does NOT Charge 1% Origination Fee:

When an Arizona VA mortgage lender does not charge a 1% origination fee, the VA is okay with the veteran paying more of the costs associated with the transaction.

Sample VA Non-Allowable Fees when VA lender does not charge 1% origination fee:

  • Termite/Pest Inspection Fee (in some states)
  • Attorney fee charged as a benefit to the lender
  • Mortgage broker fee
  • Realtor commission
  • Prepayment penalties
  • HUD/FHA Inspection fees for the builder

Typical VA Non-Allowable Fees Total when 1% origination fee is not charged:  +/- $100 in Arizona

Termite report may be paid for by Veteran in Arizona

NOTE: VA Non-Allowable Fees plus any origination fees cannot exceed 1% of the loan amount.  For example, when a lender charges a .5% origination fee the VA Non-Allowable Fees total cannot exceed .5% of the veterans VA loan amount.

Due to the complex nature of the VA Non-Allowable Fee rules, this is a commonly misunderstood concept in real estate and VA lending.  In conclusion, when in doubt reach out and ask before it is too late.

By Jeremy House

Trackbacks

  1. […] Learn more about who pays for VA Closing Costs […]

  2. […] VA Non Allowable fees are the 3rd and final category VA has for loan costs.   It is not only the final but also the most confusing category.  Simply put, VA does not allow veterans to pay any costs falling under the VA Non-allowable fee umbrella.  The confusing part for sellers and agents is figuring what costs and what amounts are considered VA Non Allowable fees.   To keep this article short check this out to learn more. […]

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