VA Loan Fee

by Mai
(Texas)

My husband is a Veteran and we are applying for a VA loan. On top of the VA funding fee that we have to pay, the lender still forces us to pay a total of more than $5K for the 'origination fee' and miscellaneous fee.

His rationale is the builder picks up these fees (as the lender has a rebate deal with the builder). Builder only offers to pick up those fees if we go with that certain lender.

But it is not fair because the builder picks up those fees for regular loans (non VA loans) as well. Thus, in fact, we are forced to pay something that we should not. I read that these fees are called 'VA non allowable' fee.

Please let us know if it is true that we should not be charged those fees?

=====ANSWER=====

Hello Mai,

You have done your homework well. Hopefully you have found my website helpful. Your questions are very legitimate.

First of all, it appears to me you are purchasing a new construction home or condo. Since you mentioned a builder I am making this assumption.

With that being understood, you are right. There is a VA Funding Fee you must pay. Depending on if this is the first time you have used the VA Home Loan, this amount can vary between 2.15% to 3.3% of the loan amount. What this fee does is make it possible for the "NO DOWN PAYMENT" home loan. This can be added to your loan and financed into the mortgage.

From what I understand, the persons exempt from paying the funding fee are:

• Veterans that are being paid for disabilities related to their services while enlisted.
  
• If the Veteran is qualified for pay related to disabilities and they did not get retirement pay.
  

So if your husband was wounded and is getting VA benefits then you can avoid this fee altogether.

I did a VA loan for guy one time that fit in this category and we was able to buy a $80,000 house using less than $500 of his own money.

Now as for the $5,000 Loan Origination fee and other miscellaneous fee. This is a different story.

The HUD website provides a list fees the veteran can pay.

Use this link to read more:

HUD Website

So if all the fees mentioned in that document are included in the $5,000 then the lender may be in the position to charge them. Depending on your loan size, this may not be a bad deal.

If your seller, in this case is paying these costs, then you should see this on your Good Faith Estimate.

VA home loans are highly regulated. I doubt if your lender is trying to pull a fast one on you. However, keep in mind, interest rate and loan origination fees can be negotiable.

Sorry for the long answer, but you have a unique situation and it requires some explaining.

Hope this helps,

Jeff Ragan