VA Loans: What Is “Reasonable and Customary”?

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One of the great benefits for a Vet getting a VA loan is that the Vet is protected somewhat against being overcharged by a loan officer. The official language from the VA is that “The veteran can pay a maximum of reasonable and customary amounts for any or all of the ‘Itemized Fees and Charges’ designated by the VA…” Source: Chapter 8, VA Pamphlet 26-7.

Although this is a benefit and a comfort to the Vet, it is a good idea that the Vet know something about what fees are expected in getting a mortgage and whether they are “reasonable and customary”.

In most cases, the best way to find out if what you are being quoted by a loan officer is to let your real estate agent have a look at your good faith estimate. Your loan officer might not like this, because not all agents understand what is on the good faith estimate which will make their job harder. However, A seasoned real estate agent can help out in this department because the see a lot transactions and have a good feel for what the fees should be.

Heck, if they can help you from being over charged in your home buying process then you are likely to refer them to your friends and family.

According to the VA here is a list of the fees that a Vet can expect to pay to get their VA loan.

  • 1% flat charge by the lender
  • Reasonable discount points (this is also negotiable and should never exceed 3%) – more discount points lower interest rate
  • VA appraisal (borrower can only pay for one appraisal)
  • Deed and mortgage recording fees, recording taxes
  • Deed Transfer tax where applicable
  • Credit report (this could be a credit report evaluation fee of $50, there may also be a RMCR – residential mortgage credit report fee)
  • Prepaid Items such as real estate taxes, assessments, escrows, etc.
  • Hazard Insurance aka homeowners insurance
  • Flood Insurance as needed
  • Flood Zone Determination
  • Land/Deed Survey where required – as in New Jersey or a condo purchase
  • Title examination, title abstract and title insurance
  • Overnight fees for a refinance
  • VA Funding Fee (usually financed or paid by the seller if negotiated)
  • MERS – Mortgage Electronic Registration System

If you find fees on your good faith estimate or loan estimate that are not on this list then you should ask about them.

It is also a good idea to compare the fees of several lenders — you might be surprised what you learn just by shopping around a little bit.

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