Whether you are applying for VA loan or any mortgage loan, a borrower has to pay the closing costs. But what exactly are you supposed to and not supposed to pay? If you’ve already began your research, you will notice words such as allowable and non-allowables. Veterans applying for VA mortgages or loans are only supposed to pay the “allowables.” David Reed, columnist for Realty Times and Mortgage Originator magazine, has created this easy to remember mnemonics (ACTORS) about the allowable closing costs for veterans:
Appraisal (aka Notice of Value, NOV) or inspection charges
Credit report fees
Title or title-related charges
Origination fees and points
Recording charges
Survey fees if needed
Now that you have an idea of what the allowables are, let’s take a quick look at the non-allowables. Here is a list of fees that CANNOT be charged to a veteran:
Document preparation, loan closing or settlement, attorney services for anything other than title work, preparing loan papers for conveyance fees, locking in interest rate services, photographs, stationery, mailing or postage charges, telephone calls, amortization schedules, general overhead, membership, escrow charges or fees, document preparation and / or assignment, notary, loan application, processing, loan broker or finders fee other than your mortgage company, trustee’s fees or charges and tax service.
Although a lender is not supposed to charge for non-allowables, there is such a thing as a “One percent Guideline.” This simply means that even though there are non-allowables, “the lender is allowed to charge a flat one percent of the loan amount and apply that fee to the various miscellaneous lender charges the veteran may not otherwise pay for,” according to Reed.
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