A Complete List of VA Non-Allowable Fees

VA home loans are backed by the U.S. Department of Veterans Affairs and help eligible borrowers obtain mortgages at lower rates than most conventional loans. The purpose behind VA loans is to make them more affordable for veterans and their families. However, unexpected closing costs can sometimes push a home outside a borrower’s budget. In a 2024 Zillow survey, 91% of buyers said they did not fully expect to pay at least one cost or fee. The most common unexpected fee was loan origination (66%)

To curb this financial burden, VA lenders are limited on the fees they’re allowed to itemize toward loan origination costs. Keep reading to find out what fees are non-allowable, who pays for VA non-allowable fees, and how to reduce the fees you are responsible for paying as a VA borrower. 

What are VA non-allowable fees?

VA non-allowable fees are costs that the VA has prohibited lenders from charging borrowers when issuing a loan, such as application fees, escrow fees, and prepayment penalties. Unlike traditional borrowers, VA borrowers don’t have to pay these fees on a VA home loan. Instead, other parties cover non-allowable fees in the deal. Here’s a comprehensive list of allowable and non-allowable VA fees.

VA allowable fees

• VA funding fee
• VA appraisal fee
• Second appraisals requested by the veteran
• Land surveys
• Property taxes (state & local)
• Title insurance
• Homeowner’s insurance
• Hazard insurance 
• Flood zone determination fee
• Mailing fees (for refinancing)
• Homeowner’s association (HOA) fees
• Recording fees
• Credit report fees
• Origination fees
• Discount points

VA non-allowable fees

• Application fees
• Appraisal requested by lender, seller, or third parties for reconsideration of property value
• Real estate agent commissions
• Prepayment penalties
• Inspection fees charged by the U.S. Department of Housing and Urban Development (HUD) or the Federal Housing Administration (FHA)
• Inspection fees requested by lender (except on construction loans)
• Escrow fees
• Attorney fees 
• Document preparation fees
• Rate lock-in fees
• Notary fees
• Settlement fees
• Tax service fees
• Trustee fees
• Postage and other overhead fees

How do non-allowable VA fees work?

The Veterans Association has guidelines on the fees a lender can charge and itemize a borrower for a VA loan. Some fees are only allowed when they are included in a 1% loan origination fee, such as:

• Rate lock-in fees
• Application and processing fees
• Document preparation fees
• Escrow fees
• Notary fees

If a VA lender chooses not to charge a flat 1% origination fee, which is the maximum loan origination fee allowed by the VA, they may itemize fees instead. When listing each fee and its associated cost, lenders are not allowed to charge the borrower for any of the non-allowable fees listed.

Who pays non-allowable VA fees?

VA non-allowable fees can still be charged by the lender, they just can’t be charged to VA borrowers. VA non-allowable fees are usually covered by the seller through seller concessions or by the real estate agent through agent commissions. In some cases, the lender might waive non-allowable fees entirely or pay for certain fees if they weren’t properly disclosed at the time of application. 

How to lower VA allowable fees

While there are many fees VA borrowers don’t need to worry about, allowable fees can still make borrowing expensive. Here are some ways to reduce VA allowable fees.

Negotiate fees with your lender

Most lender fees are negotiable. Ask your lender what fees they’d be willing to eliminate or reduce to help you afford the loan. In exchange, you can offer a quick and efficient close by filling out all your paperwork on time.

Check out our VA loan options at Zillow Home Loans*. We offer competitive interest rates and reduced closing costs with zero down payment.

Ask for a VA funding fee exemption

The VA funding fee is a standard closing cost for a VA loan, but it can be waived for veterans receiving VA disability compensation. Widows and widowers of veterans who passed away due to their service are also eligible for a funding fee exemption. 

Ask for seller concessions

If your lender isn’t willing to negotiate fees, ask for seller concessions. Sellers can choose to cover all mortgage-related closing costs and up to 4% in additional concessions on VA loans. This could potentially add up to thousands of dollars in savings. While there’s no guarantee the seller will want to cover any of your fees, it’s worth asking. If the seller agrees, be sure to include these concessions in your purchase contract. 

Purchase discount points 

You can also purchase discount points to reduce the interest rate on your VA home loan. One discount point usually lowers the mortgage rate by 0.25%. Discount points reduce the total amount of interest paid over the life of the loan, but they can be costly and need to be paid upfront. 

Roll closing costs into your loan

Lastly, VA borrowers can avoid paying allowable fees at closing by rolling them into their mortgage. While this lowers the cash required at closing, it increases the loan amount, which means you’ll pay interest on these fees over time.

*Zillow Home Loans, an equal housing lender. NMLS #10287