VA loans: Flood Zones, Hazard Insurance and Survey Fees
The Department of Veterans Affairs has a list of fees and charges a VA loan applicant may pay, a list of fees they are not allowed to be charged, and the conditions which both may be subject to depending on the situation. Circumstance can play a big part in whether a veteran can be charged certain fees; for example, the VA allows the borrower to be charged a VA appraisal fee or the cost of bringing in a VA compliance inspector.
But according to the VA, “The veteran cannot pay for an appraisal requested by the lender or seller for reconsideration of value.” There’s also a prohibition against charging the VA loan applicant for “appraisals requested by parties other than the veteran or lender.”
When it comes to fees connected to flood zones, hazard insurance, and surveys, the Department of Veterans Affairs has specific guidance for lenders. Hazard insurance premiums (including flood insurance where required) can be charged to the borrower. Flood insurance may be a condition of approval for VA loans on homes located in or near special flood hazard areas.
If a buyer wants a home that could be in a special flood hazard area, he or she may be required to pay for flood zone determination. VA rules dictate how and when this service can be charged to the borrower. “The veteran can pay the actual amount charged for a determination of whether a property is in a special flood hazard area, if made by a third party who guarantees the accuracy of the determination.” VA rules also add, “The veteran can pay a charge for a life-of-the-loan flood determination service purchased at the time of loan origination.”
The “actual amount” wording in the flood zone determination fee rules effectively prohibits a lender from inflating or padding the fee for such a service. Additionally, the VA rule book does not allow a VA mortgage loan applicant to be charged a fee for flood zone determination services when such determination was made by the lender or a VA appointed appraiser.
Survey fees for suburban-type homes may be charged when the service is required by either the borrower or the lender. There is a prior-approval requirement for survey fees charged to the borrower when the survey is for a VA condo loan–lenders must seek permission from the Department of Veterans Affairs for condo loan survey fees.