VA Loan Rules: What is a VA Non-Allowable Charge?

by | BiggerPockets.com

When a veteran is in the process of qualifying for a VA loan, there are certain costs associated that veterans are allowed within the rules of a VA loan to pay — and there are certain closing costs that the veteran is not allowed to pay according to the rules of getting a VA loan.

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Getting a VA Appraisal

The process of getting an appraisal done for a VA loan is different than it is for other loans, but it is allowed for the veteran to pay the cost of the appraisal AND the cost of a second appraisal if needed. Sometimes a second appraisal may be needed/wanted because the veteran will want to request a reconsideration of value based on disagreeing with the first appraisal. If there is a reconsideration of value that is requested by the veteran, then the veteran can pay. If the reconsideration of value is requested by the seller or the lender, then the veteran is not allowed to pay for the second appraisal.

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Related: Military Members: Yes, You Can Use Your VA Loan More Than Once. Here’s How.

Points: Paying Discount Points on VA Loans

As long as the discount points on a VA loan are considered “reasonable,” then it is allowed for a veteran to pay the points. This applies for new home purchases, both cash-out and no cash-out refinances. The key when it comes to paying discount points on a VA loan is to make sure that the discount points being paid are considered to be reasonable.

For VA IRRRL (also called a VA streamline refinance), the maximum amount of discount points that can be paid is two discount points. Any discount points that a veteran wants to pay above two points must be paid in cash.

Origination Points for VA Loans

For all VA loans, an origination point of 1% of loan amount is allowed to be paid by the veteran. It is not required that a 1% origination point be paid — but if there is a 1% origination point that is paid, then there are certain other fees that cannot be paid because the 1% origination fee is paid.

Related: VA Loan: The Real Estate Investor’s Guide to Eligibility & Funding

These include:

  • Amortization schedule
  • Application fee
  • Attorney services (other than for title work)
  • Photos
  • Postage and other mailing charges, stationery, telephone calls, and other overhead
  • Processing fee
  • Closing fee or settlement fee
  • Commitment fee or marketing fees
  • Conveyance fees or preparing loan papers
  • Sales commission
  • Protection warranties (Homeshield, Ticor, etc.)
  • Document preparation fee
  • Escrow fees or charges
  • Interest rate lock-in fees
  • Trustee’s fees or charges
  • Lender’s appraisals
  • Truth In Lending Disclosure Statement preparation fee
  • Tax service transfer fee
  • Notary fee

When getting a VA loan, the fees that are not allowed to be paid by the veteran are often called “VA non-allowables” or just “non-allowables,” and lenders who deal with VA loans know these (or should know these) very well. If you have questions about whether or not a particular fee is allowed on a VA loan, be sure to contact your loan officer to learn the right answer.

Any questions about VA non-allowables?

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3 Comments

  1. Andres blandon

    Hi! Thanks fr posting about the VA home loan. I am in the process of completing a purchase with this program.

    I was also wondering if i should take a lender credit of 4k or a .25% decrease in interest. The difference is about 50$ Per month.

    Any advice is appreciated!

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