VA Closing Cost

(Closing Costs a VA Loan Can 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 Approved Lenders must strictly adhere to the limitations on borrower-paid fees and charges when making VA loans.

The veteran can pay a maximum of:

  • Reasonable and customary amounts for any or all of the “Itemized Fees and Charges” designated by VA, plus
  • A one percent flat charge by the lender, plus
  • Reasonable discount points.

 

Note:  Some special provisions apply to construction, alteration, improvement, and repair loans.

The veteran may pay any or all of the following itemized fees and charges in amounts that are reasonable and customary.

Charge

Description

Recording Fees

The veteran can pay for recording fees and recording taxes or other charges incident to recordation.

Credit Report

The veteran can pay for the credit report obtained by the lender.

 

For Automated Underwriting cases, the veteran may pay the evaluation fee of $50 in lieu of the charge for a credit report.

 

For “Refer” cases, the veteran may also pay the charge for a merged credit report, if required.

Prepaid Items

The veteran can pay that portion of taxes, assessments, and similar items for the current year chargeable to the borrower and the initial deposit for the tax and insurance account.

Hazard Insurance

The veteran can pay the required hazard insurance premium.  This includes flood insurance, if required.

Flood Zone Determination

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.

 

The veteran can pay a charge for a life-of-the-loan flood determination service purchased at the time of loan origination.

 

A fee may not be charged for a flood zone determination made by the lender or a VA appraiser.

Survey

The veteran can pay a charge for a survey, if required by the lender or veteran.  Any charge for a survey in connection with a condominium loan must have the prior approval of VA.

Title Examination and Title Insurance

The veteran may pay a fee for title examination and title insurance, if any.

 

If the lender decides that an environmental protection lien endorsement to a title policy is needed, the cost of the endorsement may be charged to the veteran.

Special Mailing Fees for Refinancing Loans

For refinancing loans only, the veteran can pay charges for Federal Express, Express Mail, or a similar service when the saved per diem interest cost to the veteran will exceed the cost of the special handling.

VA Funding Fee

Unless exempt, each veteran must pay a funding fee to VA.

Mortgage Electronic Registration System (MERS) Fee

The veteran may pay a fee for MERS.  MERS is a one-time fee for the purpose of electronically tracking the ownership of the beneficial interest in a loan and its servicing rights.

Other Fees Authorized by VA

Additional fees attributable to local variances may be charged to the veteran only if specifically authorized by VA. The lender may submit a written request to the Regional Loan Center for approval if the fee is normally paid by the borrower in a particular jurisdiction and considered reasonable and customary in the jurisdiction.

 

Whenever the charge relates to services performed by a third party, the amount paid by the borrower must be limited to the actual charge of that third party.

 

Example:  If the lender obtains a credit report at a cost of $30, the lender may only charge the borrower $30 for the credit report.  The lender may not charge $35, even if it believes that a $5 handling charge is fair.

 

In addition to the “itemized fees and charges,” the approved VA loan lender may charge the veteran a flat charge not to exceed one percent of the loan amount.

 

Calculate the one percent on the principal amount after adding the funding fee to the loan, if the funding fee is paid from loan proceeds (except Interest Rate Reduction Refinancing Loans).

The lender’s flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as “itemized fees and charges.”

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