The VA Lender’s Handbook has guidelines for broker and agent fees. These guidelines are found in Chapter Eight, Section Three, which says, “Fees or commissions charged by a real estate agent or broker in connection with a VA loan may not be charged to or paid by the veteran-purchaser.”
VA mortgage loan guidelines also state “While use of ‘buyer’ brokers is not precluded, veteran-purchasers may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals. Since information on property available for purchase and financing options is widely available to the public from a variety of sources, VA does not believe that preventing the veteran from paying buyer-broker fees will harm the veteran.”
Similarly, a lender cannot charge a borrower for the lender’s attorney fees. A borrower may pay for and retain his own legal counsel, but the bank’s legal fees are not the applicant’s responsibility according to the VA Lender’s Handbook:
“VA does not intend to prevent the veteran from seeking independent legal representation. Therefore, the veteran can independently retain an attorney and pay a fee for legal services in connection with the purchase of a home. Closing documents should clearly indicate that the attorney’s fee is not being charged by the lender, but is being paid by the veteran as part of an independent arrangement with an attorney. ”
The Funding Fee
The general VA policy is that each veteran must pay a funding fee at closing to cover VA’s cost of administering the veterans mortgage loan program. Congress has oversight to change the funding fee rates to reflect changes in administrative costs, or to assist a certain class of veterans (more on that in little later). You can roll the funding fee into the VA home loan or pay it up front.
The funding fee is a percentage of the loan amount. It varies based on your loan type, your military category, whether you are a first-time or subsequent loan user, and if you make a down payment. National Guardsmen, Reserve veterans, and second-time VA loan users who do not make a down payment pay a slightly higher funding fee percentage.
You do not have to pay the funding fee if you are a veteran:
- Receiving VA compensation for service-connected disabilities.
- Entitled to receive compensation for service-connected disabilities if you did not receive retirement pay.
- Rated by VA as eligible to receive compensation by pre-discharge disability examination.
- Entitled to receive compensation but not presently in receipt because you are on active duty.
- Spouse of a veteran AND the veteran died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).
When working with a lender for a VA loan, be aware that the lender charges interest, closing fees, and other fees. Different lenders have different policies, fees, and expenses. You should shop around carefully to be sure you select a lender that is giving you the best possible deal.
Here are some general rules:
- The VA DOES NOT set the interest rate, discount points, and closing costs. These rates may vary from lender to lender
- Closing costs (VA appraisal, credit report, state and local taxes, and recording fees) may be paid by the purchaser, the seller, or shared.
- The seller can pay some closing costs. (Seller’s “concessions” can’t exceed 4% of the loan.) Payment of discount points is not subject to the 4% limit.
- Buyer cannot pay for a termite report unless the loan is a refinance.
- No commissions, brokerage fees, or “buyer broker” fees may be charged to the veteran buyer.
- The lender is responsible to verify and handle all aspects of the VA funding fee.