Fees Associated With VA Loans

The VA home loan program, like other mortgage programs, has fees associated with it. VA-eligible borrowers should expect to see the following fees in their VA loan closing documents:

• Credit report
• Appraisal
• Compliance inspection
• Lender's origination
• Reasonable discount points (if applicable)
• Pre-paid taxes
• Assessments and insurance
• Hazard insurance
• Flood zone determination
• Land survey
• Title examination and insurance
• Recording/Recording Taxes
• Mailing and/or wire fees
• VA funding fee (VA-approved)

Many of these fees itemized at a VA mortgage closing can be included in the total amount of the loan as long as it does not exceed the conforming loan limit for the county in which the VA mortgage is made. And, a VA buyer can ask the seller to pay closing costs of up to four percent of the total purchase price.

Generally, many of the fees that will be charged on VA loans are also found with other mortgage programs. These include fees for credit report, appraisal, and a compliance inspection.

Also very common charge found in all types of mortgages, including VA loans, is a lender origination fee. The VA allows lenders to charge an origination fee of up to one percent in origination.

In addition to lender origination fee, a VA-approved lender may also charge rate reduction points. This is optional if a borrower wants to lower his or her rate below prime by "paying down" the rate with percentage points. Commonly, one point is worth $1,000. Each state may have established origination and rate-reduction-point fee limits for VA home loans. For most states, the total amount of the origination plus rate reduction fees cannot exceed the state limit when combined. Many VA-approved lenders find themselves providing "free" VA loans when adhering to the state limit. In other words, no origination or point reduction fees are charged because they would exceed the state limit.

It is common to see some of the fees associated with a VA loan lumped into escrow to cover the first year's expenses. Some of the fees that could go into an escrow account include property taxes and insurance. Commonly, these fees are added to the monthly mortgage payment.

Other insurances such as hazard and flood may also appear in the monthly mortgage payment. Hazard insurance is not always required. But, flood insurance is necessary if a property is financed with a VA loan and found to be in a flood zone.

Sometimes, the property lines are not clearly defined in a real estate sale, or there may be a dispute. Another fee that can be charged with a VA-guaranteed loan is for a land survey. If a survey is necessary, the land survey charges will appear in the VA mortgage closing costs.

Just as the lender and insurance companies have their fees, the title company also charges fees. Certain fees associated with the title company include title examination and insurance (different from property insurance), recording charges and mailing/wire fees. When a title company verifies a property deed is free and clear of liens, it takes time and effort; therefore a fee is charged. If the title company should miss something in its research, like a lien on the property, title insurance protects the borrower from any liability for liens found after closing. When the title company provides the new owner's name on the real estate deed with the county recorder, a small fee is associated with this. Finally, when a title company provides the final payout on the loan, a mail or wire fee is often charged.

One fee that is absolutely unique to VA loans is the VA funding fee. VA-approved lenders are required by law to charge a VA funding fee for most VA-guaranteed mortgages. The funding fee can cost anywhere from one-half of a percentage to three and one-third percent subject to the VA-eligible borrower's military circumstances and the type of VA home loan used. Certain disabled veterans and surviving spouses are exempt from paying the VA funding fee.

Considering the fees typically found for conventional and other mortgage programs, fees for VA loans are very similar. For more information about what fees to expect with VA mortgages, contact a VA mortgage professional.