VA Loans Fees: Who Pays HUD/FHA Inspection Fees?
We’ve been discussing loan fees a borrower can and cannot pay. The Department of Veterans Affairs has rules in place to guide lenders as to what fees and expenses are allowable under the VA insured loan program, and which expenses may not be charged to the borrower.
There is a list of allowable fees, including itemized expenses such as appraisal fees, flood zone determination where required, and many others.
But there is also a list of fees the borrower may not pay, and the VA Lender’s Handbook states that the lender’s 1% flat fee is designed to cover expenses not chargeable to the borrower.
“The lender’s maximum allowable flat charge of one percent of the loan amount (or greater percentage in the case of construction loans) is intended to cover all of the lender’s costs and services which are not reimbursable as ‘itemized fees and charges.’ The lender may pay third parties for services or do as it wishes with the funds from the flat charge, as long as the lender complies with the Real Estate Settlement Procedures Act…”
The lender must not charge the borrower for a variety of things including the bank’s attorney fees, buyer broker fees, etc. The lender may not issue duplicate charges in cases where, for example, an appraisal has already been performed and has not expired. The borrower may not be charged for a flood zone determination that has already been made and paid for previously.
Another type of charge prohibited by VA loan rules? The VA loan applicant cannot be charged HUD/FHA inspection fees for builders in proposed construction projects.
If a buyer finds a property that was built under FHA or HUD supervision, the borrower cannot be charged a fee for re-inspections. According to VA loan rules, these fees “must be borne by the builder or sponsor and are not chargeable to the veteran-purchaser.”
That rule covers situations where there are required re-inspections “by VA or HUD of onsite or offsite work for which an escrow agreement was established, and any additional re-inspections deemed necessary by VA to assure conformity with VA regulations.”