VA Home Loan Fees: The Lender’s Flat Charge
When budgeting for your VA loan expenses, there are several things to anticipate–the appraisal fee, any compliance inspection fees that may be required, the VA loan funding fee, and the lender’s flat charge. The lender’s fee is often misunderstood–knowing it better can help you set aside enough money in your budget for this expense.
What is the lender’s flat fee?
The VA loan rulebook, VA Pamphlet 26-7, says, “In addition to the “itemized fees and charges,” the lender may charge the veteran a flat charge not to exceed one percent of the loan amount.”
That’s one percent of the loan amount above and beyond the itemized charges as the above line implies. How does the lender calculate this fee? “Calculate the one percent on the principal amount after adding the funding fee to the loan, if the funding fee is paid from loan proceeds (except Interest Rate Reduction Refinancing Loans (IRRRLs)).” That line anticipates the first question on the minds of many borrowers–can the lender’s fee be included in the loan amount?
And, according to VA Pamphlet 26-7, the answer is yes. New purchase home loans may include the one percent flat fee if the borrower wishes to finance it.
What does the flat fee pay for? “The lender’s flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as itemized fees and charges.”
According to VA loan rules, those costs and services may include the following:
- Lender’s appraisals
- Lender’s inspections, except in construction loan cases
- Loan closing or settlement fees
- Document preparation fees
- Preparing loan papers or conveyancing fees
- Attorney’s services other than for title work
- Interest rate lock-in fees
- Postage and other mailing charges, stationery, telephone calls, and other overhead
- Amortization schedules, pass books, and membership or entrance fees
- Escrow fees or charges
- Notary fees
- Commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser
- Trustee’s fees or charges
- Loan application or processing fees
- Fees for preparation of truth-in-lending disclosure statement
- Fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and
- Tax service fees
It is very important to note that the borrower cannot be charged twice for such items–what appears in this list cannot be charged again elsewhere or under a slightly different description for the same service or expense. In fact, VA Pamphlet 26-7 says quite clearly that the list above provides “examples of items that cannot be charged to the veteran as ‘itemized fees and charges.’ Instead, the lender must cover any cost of these items out of its flat fee”.
Borrowers who feel they are being charged twice in violation of VA loan rules should contact the Department of Veterans Affairs for assistance.
Do you have questions about VA home loans? Ask us in the comments section.