VA Closing Costs Exemptions
VA Loan Can NOT Be Charged)
The VA home loan program involves a veteran’s benefit. VA policy has evolved around the objective of helping the veteran to use his or her home loan benefit. Therefore, VA regulations limit the fees that the veteran can pay to obtain a loan.
VA Loan Lenders must strictly adhere to the limitations on borrower-paid fees and charges when making VA loans which is why so many Veterans and Active Duty Service Members are “steered” away from a VA Loan and told that any “Civilian loan” is better.
The approved VA Loan 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 (RESPA).
The lender may not charge the borrower for attorney’s fees. However, reasonable fees for title examination work and title insurance can be paid by the borrower. They are allowable itemized fees and charges.
VA does not intend to prevent the veteran from seeking independent legal representation. Therefore, the veteran can independently retain an attorney and pay a fee for legal services in connection with the purchase of a home. Closing documents should clearly indicate that the attorney’s fee is not being charged by the lender, but is being paid by the veteran as part of an independent arrangement with an attorney.
Fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the veteran-purchaser.
While use of “buyer” brokers is not precluded, veteran-purchasers may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals. Since information on property available for purchase and financing options is widely available to the public from a variety of sources, VA does not believe that preventing the veteran from paying buyer-broker fees will harm the veteran.
A veteran obtaining a VA refinancing loan cannot use loan proceeds to pay penalty costs for prepayment of an existing lien.
A veteran purchasing a property with a VA loan cannot pay penalty costs required to discharge any existing liens on the seller’s property.
In proposed construction cases in which the dwelling was constructed under the Department of Housing and Urban Development (HUD) supervision, the cost of any inspections or re-inspections must be borne by the builder or sponsor and are not chargeable to the veteran-purchaser. This includes:
·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.
The following list provides examples of items that cannot be charged to the veteran as “itemized fees and charges.” If it IS a VA Loan, “Civilain” Loans like Conventional and FHA Loans you WILL be charged. Instead, the lender must cover any cost of these items out of its flat fee:
·Loan Closing Lender Fees
·Lender Document Preparation Fees
·Attorney’s services other than for title work
·Interest Rate Lock In Fees
·Postage and other mailing charges, stationery, telephone calls, and other overhead
·Amortization schedules, pass books, and membership or entrance fees
·Commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser
·Trustee’s fees or charges
·Loan application or processing fees
·Fees for preparation of truth in lending disclosure statement
·Fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and tax service fees.