VA Loan Fees: Are They Refundable?
When a veteran or active duty service member applies for a VA home loan, a process begins that costs a fair bit of money above and beyond the amount the seller offers for a particular property. The VA loan funding fee is one such cost, and there are others; the buyer may be required to pay a title examination fee, title insurance, running credit reports, the lender’s one percent flat fee…there are plenty of things the buyer could have to pay for along the way.
But what happens if a buyer applies for a VA guaranteed home loan, picks out a house, and gets all or part of the way through the process only to have a change of mind at the last minute?
There are plenty of situations that could cause a borrower to cancel the process. If a veteran is buying a home but is given deployment orders to a war zone, for example, that could make a buyer reconsider until after the deployment. Medical emergencies, family planning, a change of lender, even a simple case of cold feet can affect the sale of the home.
In these situations, what happens to the money a buyer has paid for things like a title exam, flood plain determination or other fees?
According to VA requirements, the borrower’s expenses for VA approved itemized fees or charges do not get refunded. In many cases this is because a service was already provided—any paid inspection or determination has already been rendered and can’t be refunded for that reason.
There is one exception in the case of the lender’s one percent flat fee. If that fee has already been collected, the bank or finance company must refund the fee no matter what the reason the borrower gives for canceling the loan—including going to another bank. That one percent fee is for a service that has not been rendered when the loan is cancelled, so it only makes sense that the borrower would get that money back.