VA Loan Fee Rules
VA Loan fees are a typical part of doing business with a VA home loan. If you buy any type of property with a home loan, there are associated fees and expenses to deal with. With VA loans, these fees are regulated and controlled to protect borrowers and to insure lenders have specific guidance for what’s permitted and what’s not.
The loan fee rules governing VA loans are found in VA Pamphlet 26-7, Chapter Eight. This chapter begins with the following:
The VA Home Loan program involves a veteran’s benefit. VA policy has evolved around the objective of helping the veteran to use his or her home loan benefit. Therefore, VA regulations limit the fees that the veteran can pay to obtain a loan. Lenders must strictly adhere to the limitations on borrower-paid fees and charges when making VA loans.”
When it comes to the fees associated with a VA home loan, Chapter Eight says the borrower can pay “any or all of the following itemized fees and charges in amounts that are reasonable and customary.” Those charges include a VA loan funding fee (except for those who are exempt) and a one percent lender’s flat fee. Discount points may also be purchased by the borrower to lower interest rates where applicable.
Borrowers can pay a variety of charges including a fee for the lender’s requests for credit reports, flood zone determination, appraisal fees, prepaid taxes and other expenses. The fees and expenses for services rendered such as appraisals or flood zone determinations may only be the amount required for the services–the lender may not mark up the price or tack on additional amounts to these costs.
A borrower who is not exempt from paying the VA loan funding fee can reduce the amount of that funding fee by making a down payment of 5% or more. The down payment is not required but many borrowers decide lowering the fee is a good idea, therefore the down payment is something to consider when trying to budget for your VA home loan.
It’s always good to start planning and saving for these expenses as early in the process of buying a home as possible. The longer you save, the more affordable these fees and expenses become.
Do you have questions about VA home loans? Ask us in the comments section.