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Garrick's Blog

By Garrick | Mortgage Broker
or Lender in Alameda, CA

Allowable VS Non-Allowable Closing Costs a Veteran May Pay When Purchasing or Refinancing a Home with VA Financing in Oakland


I receive a lot of questions regarding what fees a Veteran is allowed and not allowed to pay in a real estate transaction. Here is a summary of allowable and unallowable costs from one of the lenders I frequently work with.

 

 

ALLOWABLE CLOSING COSTS

 

Veteran may pay any of the following reasonable closing costs and fees:

· 1% origination fee for purchase and cash-out loans, the origination fee is calculated using the total loan amount, including the financed funding fee

· For IRRRLs, the origination fee is calculated using the payoff minus any cash payments by the veteran, if applicable

· Reasonable discount points: Brokers may charge only those discount points required to buy down the loan’s interest rate – Correspondents/VA Automatic customers are exempt from this requirement, however, the discount points charged must be reasonable and customary

· VA appraisal fee – The veteran may not pay a fee higher than the maximum allowable appraisal fee for the state in which the property is located – See VA Appraisal Fee Schedules

· VA compliance inspector fees – Only if required by the NOV (Notice of Value)

· Recording fees

· Taxes and stamps

· Credit report fees – a $50 credit evaluation fee may be paid in lieu of the credit report fee for automated underwriting approvals

· Pre-paid items

· Insurances (hazard and flood, when required)

· Flood zone determination

· Well and septic inspection fees

· Survey, if required by lender or veteran, except for surveys of condominiums

· Title insurance, title examination, title endorsement, title policy, title search

· Environmental protection lien endorsement

· Express mail fees for refinances if the saved per diem interest cost to the veteran will exceed the cost of the special handling – Anything over $50, provide the invoice to verify fee

· VA funding fee

· Mortgage Electronic Registration System (MERS) fee

· Closing protection letter – Should not exceed $35

· Fraud protection report

· Termite, provided the loan is a cash-out refinance – The borrower may never pay these fees for purchase transactions

 

If a fee is not listed above, assume VA does NOT permit the veteran to pay it

 

NON-ALLOWABLE BORROWER-PAID CLOSING COSTS

Generally, the veteran may NOT pay any of the fees listed below, but the seller or lender may pay the non-allowable fees. However, if no origination fee is charged and the fee is not listed in the section below that itemizes fees the Veteran may never pay, the Veteran may pay non-allowable costs up to 1% of the purchase price. The veteran may also pay a combination of non-allowable fees and an origination fee, provided the combination does not exceed 1% of the purchase price.

 

The non-allowable fees are:

· Attorney fees other than for title commitments

· Lender’s appraisals

· Lender’s inspections, except construction loan inspections and inspections required on the appraisal/NOV

· Loan closing or settlement fees

· Doc prep, underwriting, loan application, admin or processing fees

· Assignment fees

· Photographs

· Interest rate lock-in fees

· E-Mail, fax, copying, postage, stationery, telephone or other overhead charges

· Amortization schedules, Truth-in-Lending fees, etc.

· Notary fees

· Escrow fees or charges

· Commitment fees or marketing fees of secondary purchasers

· Trustee fees

· Fees charged by third parties, regardless of affiliation with lender

· Tax service fees

· Termite inspection fee for a purchase transaction

· Attorney fee that benefits the lender

· Broker fee

· Brokerage fees or commissions charged by real estate agents or real estate brokers in connection with a VA loan

· Prepayment penalties financed through a refinance transaction – When the payoff states a pre-payment penalty is due, veterans may pay pre-payment penalties out-of-pocket only

· FHA/VA inspection fees for builders (Normal new construction inspections of the dwelling are permitted when required by the appraiser)

· Any portion of the seller’s lien(s) or short sale fees

· For purchase transactions, the cost of required repairs and inspections must be paid by the seller. This policy applies to all purchases, including purchases of REO properties. VA does not permit the veteran to pay for repairs other than minor termite damage repairs

 

For more information about VA financing feel free to call 510-282-5456 or email info@garrick.biz.

 

Related Articles:

VA Interest Rate Reduction Loan

 

 VA Loan Requirements and Eligibility


Approved Property Types and Loan Limit for VA Loans

 
How to Purchase a Home with a VA Loan

 

 

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