While most VA-backed loan users will pay a funding fee as part of their participation in the program, the agency has rules in place that prohibit veterans from paying other fees related to their new mortgages.
But VA-backed borrowers won’t be exempt from everything. Here’s a quick look at what costs you may or may not be asked to cover, courtesy of the VA Lenders Handbook; for more on the VA loan process, visit our VA Loan Center.
Lawyer up? Veteran borrowers can’t be charged general attorney’s fees by their lender, but they are free to pay for a lawyer independently of their loan to look over documents. Lenders also may charge borrowers for specific legal costs, such as title examination and insurance.
Brokerage ban. Borrowers cannot “under any circumstances” pay buyer-broker fees as part of their loan. Per the handbook, the fees aren’t necessary because “information on property available for purchase and financing options is widely available to the public from a variety of sources.” These brokers can be used by the lender, but they can’t pass the cost forward.
Prepayment payouts. Borrowers can’t pay these penalty costs, either on their own existing loan (as part of a refinance) or on the seller’s loan (as part of a purchase).
Appraisals and inspections. Veterans can pay initial VA appraisal fees and can pay for subsequent appraisals if they’re seeking a value adjustment. But they can’t be made to pay for those secondary appraisals at the request of the lender or seller, nor can they be forced to pay for appraisals requested by other parties. Some inspection fees also are off limits, especially those involving re-inspections of dwellings built under Department of Housing and Urban Development supervision.
What can you pay? This leaves plenty of fees on the table, including added charges to related to construction costs, as well as title examination and insurance fees. There’s also a blanket 1 percent lender’s fee that covers most paperwork, escrow, processing and other costs; click here (PDF) for a list of fees that the lender cannot itemize separately from the 1 percent fee.
State-by-state exceptions: Check here (PDF) to see if your state’s rules allow veterans to be charged some of the fees outlined above. If you believe you are facing fees that you shouldn’t have to pay, contact your regional loan center for guidance.
Kevin Lilley is the features editor of Military Times.