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.
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.
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
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