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

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