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

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.

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.

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.

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.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.