Written by Isaac F. Davis,

With VA-guaranteed home loans, certain fees like an appraisal fee or VA funding fee, are to be expected. However, some fees are not allowed and cannot be charged to a military member using his or her VA home loan benefits.

The U.S. Department of Veterans Affairs forbids the following fees from being charged to any veteran:

1. Property seller or mortgage lender attorney fees
2. Real estate agent or broker commissions
3. Buyer’s broker fees
4. Property inspection costs on HUD-built homes
5. Any lien penalties on homes for sale

 

Mortgage lenders and sellers may not charge military borrowers attorney or legal fees.  If a VA borrower chooses to hire his or her own attorney and pay the legal fees associated with such a service, then that is acceptable. 
Another fee that cannot be charged to a VA borrower is real estate agent or broker commissions. Careful reading of closing documents is required as some real estate agents may craft the language in purchase contracts to disguise commissions as something else.
Additionally, brokerage fees and commission associated with a home-finding brokerage may not be charged to a VA-eligible borrower. The VA guidelines state that property availability and purchase price information are widely available through online multi-listing services and other real estate advertisements.  A VA mortgage applicant should be able to find a suitable property using real estate agent and the typical listing resources available.

Another unusual fee that is not approved for VA borrowers is inspection or re-inspection costs where the Department of Housing and Urban Development (HUD) homes are involved. The builders are the ones who are to pay for inspections on these types of HUD-approved constructions.

Most of the fees restrictions associated with VA loans are intended to be adhered to by the entity charging the fees. Lenders, agents, brokers and builders are expected to know which fees are acceptable to charge VA borrowers.  But, there is one fee restriction placed directly on the VA borrower.  A veteran who finances a property with a VA purchase loan is forbidden to pay any lien penalties, such as prepayment penalties, on the property for sale. 

For additional information about VA-backed mortgages and forbidden fees, contact an experienced VA loan professional.