Who Pays the VA Non-Allowable Fees?

VA Non-Allowable Fees

VA Non-Allowable Fees

Arizona VA home loans have a guideline that does not allow veterans to pay certain fees associated with a Arizona VA Mortgage.   The fees the Veteran cannot pay are called “VA Non-Allowable Fees.”  The fees that are included in the VA Non-Allowable Fees category differ based on whether or not the Arizona VA Mortgage Lender charges a 1% origination fee on the Veterans new VA loan.

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How Much are VA Non-Allowable Fees?

There are 2 ways to calculate VA Non-Allowable Fees on a VA home loan.  There is one set of fees that a veteran cannot pay if the VA lender is charging a 1% origination fee.  There is a second set of fees a veteran cannot pay if the VA lender is not charging a 1% origination fee.  Let’s dig in a little deeper:

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

When a lender charges a 1% origination fee the list of VA Non-Allowable Fees is longer.  The VA wants to limit how much the veteran is paying in closing costs.  If they veteran is already paying a 1% origination fee they are not allowed to pay several other fees as a result.

In contrast, when a lender does not charge a 1% origination fee the list of VA Non-Allowable Fees is shorter due to the fact that the veteran has not come out-of-pocket for a 1% origination fee.  In that case the VA is okay with the veteran paying more of the costs associated with the transaction.

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Sample list of VA Non-Allowable Fees when a VA lender charges a 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

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

*these are the most common VA Non-Allowable fees there may be others

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

If the 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 list of VA Non-Allowable Fees when a VA lender does not charge a 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 on a Resale transaction when a 1% origination fee is not charged:  +/- $100 in Arizona

IMPORTANT: Termite report may be paid for by Veteran in Arizona

NOTE: The cost of the VA Non-Allowable Fees and the origination fee cannot exceed 1% of the loan amount.  For example, if the lender charges a .5% origination fee the VA Non-Allowable Fees total cannot exceed .5% of the veterans VA loan amount.

This is a commonly misunderstood concept in real estate and VA lending.  Contact the HOUSE Team with any questions about how VA Non Allowable fees work.

Phone:  602.435.2149
Email:  Team@JeremyHouse.com

By Jeremy House

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