VA loans

VA Loan Fees: Who Pays?

March 19, 2015

VA Loan Fees: Who Pays?


There are many VA loan fees involved when it comes to purchasing a home with your VA benefits. VA appraisals are mandatory as part of the loan approval process, but the home inspection process is not, it’s an optional part of the home buying experience.

The home inspection fee question seems fairly obvious: The borrower elects to have the inspection done, so the borrower pays for the service. But in the case of the VA appraisal, who pays? According to VA loan rules found in VA Pamphlet 26-7, it’s the borrower’s responsibility not only to pay the VA appraisal fee, but also to pay the fee for any required compliance inspection that might be needed as a result of the appraisal.

These rules are found in Chapter Eight, which says, “The veteran can pay the fee of a VA appraiser and VA compliance inspectors…The veteran can also pay for a second appraisal if he or she is requesting reconsideration of value.”

However, Chapter Eight also points out two instances where the borrower may not be required to pay additional VA appraisal fees, namely in situations where the lender has requested a new appraisal for the purpose of “reconsideration of value.” The borrower also can’t be required to pay for an appraisal requested by a third party (in other words, someone who is not the borrower or the lender).

Some borrowers are confused by the appraisal fee system, and wonder why a refund of the appraisal fee isn’t warranted if the deal never closes.

Borrowers should know that VA appraisal fees and compliance inspection fees are for a service rendered, rather than the outcome of the appraisal. The appraiser must be paid no matter what the outcome of his/her services. Borrowers who choose in the end not to purchase a home that has been appraised (sometimes because the appraisal brings back a fair market value lower than the sale price of the home) still owe the appraiser for the work done.

  1. Christy

    If an appraisal comes back lower than the contracted price, is the seller required to sign documentation allowing the buyer to cancel the contract? Thank you!

    • Joe Wallace

      VA loan rules don't permit the borrower to be forced into purchasing a home using a VA mortgage when the home appraises lower than the asking price. This is known as the VA escape clause and is applicable regardless of whether or not it's specifically included in the purchase agreement or not--the rules of the VA loan program require the escape clause.

      • Christy

        Thank you, Joe. It sounds like the escape clause is not actually a document that must be signed by both parties but rather is just a term of the loan. Do I understand correctly that there is no form I need to have signed?

        • Joe Wallace

          Correct--the escape clause is an amendment to the loan agreement that applies regardless of whether the documents you did sign contain it or not.

  2. Tami

    I live in Southern IN and have a mortgage company that is not in the city which I live. How can I make sure I am not being screwed when it comes to the fees I am paying on my VA loan. I have been told by the mortgage company that closing costs could exceed $4,000. Is that accurate? I thought it was around $3,000. Is there a list or fee schedule that I could see in respect to the closing costs for a VA loan?

    • Joe Wallace

      The HUD publication titled, "Shopping For Your Home Loan" says, " Whether you apply for a loan with a lender or mortgage broker, you should receive Good Faith Estimates of settlement costs from multiple loan originators to make certain you get the best loan product at the lowest interest rate and lowest settlement costs."

  3. paul

    if I receive my certificate of elgibility and something falls through like an appraisal can I use the certificate on a different home or do I have to go through the process again???

    • Joe Wallace

      Your VA Certificate of Eligibility would be current until you actually purchase a home using the VA loan, then your entitlement would change to reflect how much was used in that transaction.

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