VA Refinancing Loans: Charges That Can Be Included in the Loan Amount
For VA guaranteed mortgage loans, there are lists of items which may be included in the loan amount. Many borrowers want to know which things are permitted to be financed as part of the VA loan and which must be paid up front.
For example, what are the borrower’s options when it comes to the VA funding fee? According to the VA Lender’s Handbook Chapter Eight, Section Seven, “For all types of VA loans, the loan amount may include the VA funding fee.”
But the rules often change depending on the type of VA home loan. Chapter Eight also states, “No other fees and charges or discount points may be included in the loan amount for regular purchase or construction loans.”
Also, “Only refinancing loans may include other allowable fees and charges and discount points in the loan amount.”
What are some of the other rules governing charges that can be included in refinancing loan amounts? The rules differ between refinancing loan types. Cash-out VA refinancing loan rules state, “…allowable fees and charges and discount points…may be paid from cash proceeds of the loan, as long as total loan proceeds do not exceed 90 percent of the reasonable value of the property.”
A further reading of these guidelines reveals that only the VA funding fee and/or the cost of permitted energy efficiency improvements “can be added to the 90 percent limit to increase the loan amount.”
When it comes to VA Interest Rate Reduction Refinancing Loans, the charges and fees a borrower can add to the loan amount include any allowable fees and charges including closing costs from the “Itemized Fees and Charges” list, the VA funding fee, plus the lender’s flat charge.
The VA rulebook adds, “However, there is one limitation unique to IRRRLs: While the borrower may pay any reasonable amount of discount points in cash, no more than two discount points can be included in the loan amount.”
Do you have VA loan questions? Ask us in the comments section.
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.