Closing costs are the fees that a borrower normally has to pay when buying a home. Typically, the total cost for these expenses adds up to about 3-6% of the loan amount. The good news is, that if you’re buying a house with a VA loan, the closing costs could be a lot less. There are certain fees that professionals aren’t allowed to charge. Below, we’ve shared a list of non-allowable fees.
Understanding the 1% Rule
When it comes to fees for VA home loans, it’s critical to understand the 1% rule. The 1% rule limits the fees that can be charged to Veterans. Lenders can charge a flat 1% fee on the loan amount to cover costs related to loan processing, underwriting, and origination.
This fee consolidates various non-allowable fees into one straightforward charge, ensuring transparency and affordability. When this fee is applied, lenders cannot add extra charges for loan application, document preparation, agent fees, or other overhead expenses. This rule protects Veterans from excessive fees, keeping VA loans cost-effective and accessible.
List of Non-Allowable Fees for VA Loans
When a lender opts to charge the flat 1% fee on a VA loan, there are several specific non-allowable fees that they cannot pass on to the Veteran. Here is a comprehensive list of these non-allowable fees for VA home loans:
- Loan Application Fees – Charges for applying for a mortgage.
- Loan Processing Fees – Costs associated with processing the mortgage application.
- Underwriting Fees – Charges for the assessment and decision-making process of the mortgage application.
- Document Preparation Fees – Fees for preparing legal and loan documents.
- Agent or Trustee Fees – Commissions paid to agents.
- Interest Rate Lock-In Fees – Costs to lock in a specific mortgage interest rate.
- Escrow Fees – Charges related to the handling of funds in an escrow account.
- Notary Fees – Costs for notarization of necessary documents.
- Tax Service Fees – Fees for third-party verification of property taxes.
- Postage and Mailing Costs – Charges for handling and sending documents.
- Loan Closing or Settlement Fees – Fees directly associated with the closing or settlement of the loan.
- Lender Appraisals – Fees for property appraisals conducted by the lender.
- Lender Inspections – Costs for inspections required by the lender.
- Photograph Costs – Charges for photographs required during the loan processing or inspection phases.
Chat with a VA Loan Expert
If you have questions about fees for VA home loans or would like to begin the application process, please contact our office. One of our VA mortgage experts will be more than happy to assist you!
