VA Loan Fees Buyer Cannot Pay

The word fees written on a blackboardAre you considering using a VA loan to finance your home purchase? It's important to be aware of the various fees associated with this type of loan. In this article, we will discuss VA loan fees that buyers are not allowed to pay. By understanding these fees, you can better prepare for the home buying process and ensure a smooth transaction.

VA Loan Fees Buyer Cannot Pay

Are you considering using a VA loan to finance your home purchase? Knowing the various fees associated with this type of loan is essential. This article will discuss VA loan fees that buyers cannot pay. Understanding these fees, you can better prepare for the home-buying process and ensure a smooth transaction.

Understanding Seller VA Non-Allowable Fees

When using a VA loan to purchase a home, it's crucial to understand that certain fees are not allowed for the buyer. The Department of Veterans Affairs puts in place these restrictions to protect veterans and eligible service members from excessive out-of-pocket expenses. In this article, we'll explore the fees buyers cannot pay when using a VA loan and discuss how these costs are typically handled in a real estate transaction.

Non-Allowable Fees in VA Loans

The VA has established a list of fees that cannot be charged to the buyer in a VA loan transaction. These are often called "non-allowable fees" or "unallowable fees." The following are some of the most common fees that fall into this category:

  • Real Estate Agent Commissions: The buyer cannot pay any portion of the real estate agent's commission.
  • Attorney Fees: The buyer cannot pay attorney fees if not required by state law.
  • Escrow Fees: The buyer cannot pay fees to establish or maintain an escrow account.
  • Loan Application or Processing Fees: Lenders cannot charge the buyer for processing or submitting a loan application.
  • Document Preparation Fees: Fees for preparing loan documents cannot be charged to the buyer.
  • Underwriting Fees: The cost of underwriting the loan cannot be passed on to the buyer.
  • Mortgage Broker Fees: If a mortgage broker is involved, the buyer cannot be charged their fees.
  • Tax Service Fees: Fees for verifying property tax amounts cannot be charged to the buyer.
  • Conveyance Fees: Costs associated with conveying the property cannot be charged to the buyer.
  • Lender's Inspection Fees: The buyer cannot pay for inspections required by the lender.

How Non-Allowable Fees Are Handled

Since these fees cannot be charged to the buyer, they are typically handled in one of three ways:

  1. Seller Concessions: The most common solution is for the seller to pay these fees as part of their closing costs. This is often negotiated as part of the purchase agreement.
  2. Lender Credits: Some lenders may offer credits to cover these fees, potentially in exchange for a slightly higher interest rate.
  3. Real Estate Agent Concessions: In some cases, agents may agree to reduce their commission to help cover these costs.

It's important to note that while the buyer cannot pay these specific fees, they are still responsible for other closing costs and the VA funding fee (unless exempt).

Allowable Fees in VA Loans

To provide a clear contrast, here are some fees that VA loan buyers are allowed to pay:

  • VA Funding Fee: This is a one-time fee paid to the VA to help sustain the loan program.
  • Appraisal Fees: The buyer can pay the cost of the VA appraisal. Appraisal fees vary depending on the location and type of property.
  • Credit Report Fees: Buyers can pay for their credit report.
  • Title Insurance: The buyer can pay for their title insurance policy.
  • Recording Fees: Costs associated with recording the deed and mortgage can be paid by the buyer.
  • Survey Fees: If required, the buyer can pay for a property survey.
  • Origination Fees: Lenders can charge up to 1% of the loan amount as an origination fee.

Negotiating VA Loan Fees

When using a VA loan, it is crucial to work with a real estate agent and lender who are experienced with VA transactions. They can help negotiate with the seller to cover non-allowable fees and appropriately allocate all costs.

During the negotiation process, buyers should:

  • Communicate that they're using a VA loan early in the process.
  • Review the purchase agreement carefully to ensure non-allowable fees are not inadvertently included.
  • Be prepared to negotiate seller concessions to cover these fees.
  • Consider the overall deal when negotiating, as sellers may be more willing to cover these fees if the offer price is attractive.

Conclusion: VA Loan Fees Buyer Cannot Pay

Understanding which fees a VA loan buyer cannot pay is essential for a smooth and compliant transaction. By being aware of these restrictions, buyers can better negotiate their home purchase and avoid unexpected costs. Sellers and their agents should also be familiar with these rules to structure deals that work for VA buyers.

While these restrictions may seem complex, they ultimately make homeownership more accessible and affordable for those who have served our country. As always, working with experienced professionals who understand the nuances of VA loans can help ensure a successful and cost-effective home-buying experience.

SOURCE:
Chapter 8. Refinancing Loans

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