Yes, I know that sounds weird, but there are actually fees that as a borrower you aren’t responsible for. While the borrower certainly has fees he or she is obligated to pay, there are some that the VA does not allow the borrower to pay for. Be prepared to pay for closing costs and insurance, but you should definitely be raising eyebrows if someone asks you to pay for attorney’s fees. The bank, lender, or seller cannot have you pay the fees for their legal representation. If you, the borrower, choose to have an attorney with you, that is, of course, your prerogative and you are responsible for your attorney’s fees.
Another fee that you as a VA borrower are not allowed to be charged is the commission for a real estate agent. The agent is not allowed to charge you for their commission or add on any other charge that serves the purpose of a commission but is under a different name. The VA has plenty of rules that pretty comprehensively cover any sort of loophole that a real estate agent may try to find to charge some sort of commission. It is fine for a buyer to enlist the services of a “buyer broker” in searching for a home, but the brokerage fees and any commissions cannot be paid by the buyer. While it may be difficult to find a home where the seller is willing to cover the brokerage fees and commissions, the VA maintains that information about homes up for sale is public and easily attainable without a buyer broker, so being forbidden to pay brokerage fees and commissions won’t hamper your ability to find a home that suits your needs.
The VA will also prohibit the borrower from paying other fees. If the property to be purchased was built “under the supervision” of the Department of Housing and Urban Development (HUD), then the VA borrower is not allowed to pay for the inspection or re-inspection fees of the property. If the property needs to be inspected or re-inspected, it is the builder or sponsor’s responsibility to cover the costs of the inspection. In addition, the VA borrower is not allowed to pay any penalty costs that have to do with liens that are currently on the property. Those penalties are not the responsibility of the buyer when the VA borrower purchases the property.
For the borrower, military.com has a handy acronym to help you remember what costs you’re allowed to pay: ACTORS. A VA borrower is allowed to pay for the Appraisal fees, the cost of the Credit report, the Title insurance cost, the Origination Fee, the Recording fee, and the cost of the Survey. The appraisal fees are all of the costs associated with the official VA appraisal, which is different from an inspection, and has a different purpose. Paying to get a credit report is also the responsibility of the buyer and is something you should expect. Being required to pay for title insurance blindsides some people, especially since title insurance provides no real benefit to the buyer – only to the lender. But it is considered part of the cost of getting a mortgage. The origination fee is a fee charged by the lender to cover the cost of processing the loan. The recording fee is charged by the county clerk to record documents in the public record. It is not something the lender has much control of. Up the alley with the VA appraisal, as a borrower you may also be required to pay for a survey of the property.
With those covered, back to the good news – what the borrower doesn’t have to pay for. We’ve already mentioned that the buyer is not responsible for attorney fees, but the borrower is also not obligated to pay any underwriting fees. The veteran also cannot pay for escrow fees or charges, any processing fees, any document fees, or tax service fees. The question comes, then, if the borrower is not paying these fees, then who is? Well, it depends on which fee, and the circumstances. The seller can pay the fees, an agent might pay them, or the lender might pay for some of the fees. The main takeaway from this is to make sure that you aren’t being asked to cover something that by law they are not able to ask you to cover.