In a recent blog post we discussed some of the fees a lender is allowed to charge the borrower as part of the cost of doing business with a VA insured mortgage.

The Department of Veterans Affairs has strict rules about how much the borrower can be charged. The VA puts rules in place to protect borrowers and lenders alike–one of the rules designed to protect the loan applicant covers fees for services rendered.

The regulations on lender fees has two components. One is the rule that forbids inflating the costs of a service. For example, when the lender charges a borrower the costs of getting a credit report, only the actual cost may passed on to the borrower. No additional, administrative or other extra fees may be tacked on by the lender for that third-party service.

The rules, according to the VA Lender’s Handbook, specifically state, “Whenever the charge relates to services performed by a third party, the amount paid by the borrower must be limited to the actual charge of that third party.”

A flood zone determination that cost the bank X amount of dollar must, under this rule, cost the borrower that same X amount. The second component for this rule involves what some might call “double dipping”. VA rules forbid a lender from charging the VA loan applicant a second fee for services already rendered.

If an appraisal has been paid for and services rendered for a buyer who decided not to purchase the home, the lender cannot charge a new buyer for that appraisal. If the appraisal is still valid, VA rules state the new buyer must not be required to pay. If a second appraisal is ordered, the buyer would pay for that service.

It’s important to note that these rules mostly apply in situations where third parties have performed services such as credit report delivery, appraisals, etc. VA borrowers should also understand they are responsible for paying in cases where the buyer (not the lender) have requested a specific optional service such as having a lawyer review a purchase contract or hiring a home inspector.

The lender has nothing to do with these charges, the payments of such charges, or negotiating the price of those optional services requested by the borrower.

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