Answer:
Ultimately, lender non-allowables are closing costs that the seller is responsible for paying.
In a VA loan, there are several closing costs that are known as lender non-allowable items, because the Veterans Administration does not allow the borrower to pay these costs.
The VA limits the amount of origination fees that a lender can charge for a VA backed loan. The charges cannot exceed 1% of the loan amount.
In order to complete the sale, someone has to cover these fees. In either case, it is a negotiable that will have to be worked out between all of the parties involved in the sale.
This page includes a breakdown of the most common allowable and non-allowable charges and fees.
VA loan non-allowables
- Base Escrow Fee
- Loan Tie-in Fee
- Attorney fee charged as a benefit to the lender
- Transaction coordinator fee
- Reconveyance Fee (okay on refi only)
- Demand/Payoff Statement Fee (okay on refi only)
- Sub Escrow Fee (title payoff fee)
- Prepayment penalties (okay on refi only)
- Any lender document fee
- Assignment fees
- Documentary transfer tax fee
- Title policy endorsement fees
- Home protection plan
- Processing fee
- Real estate agent commission (seller pays)
- Warehouse fee
- Loan discount points
- Charges by other lenders
- Bring-down fee
- Change of ownership fee (PCOR penalty)
- Tax service contract
- Underwriting fee
- Homeowners association transfer fee
- Administration fee
- Photo inspection fee
- Recording fee-balance above $17.00
- Termite fees or work charges (often covered by the seller)
- Any messenger fee including overnight delivery
- Notary fees
VA Loan Allowables:
- Recording fee (maximum of $17.00)
- Notary fee
- Interest from day of recording
- Title insurance (ALTA)
- Tax proration to day of recording
- Credit report
- Home protection plan (if requested by borrower upfront)
- Hazard insurance premium
- Appraisal (if ordered in veteran’s name)
- Document draw fee (if required for buyer)
FHA Loan Allowables:
- Title insurance ALTA
- Base escrow fee
- Recording fees (the actual fees)
- 1% loan origination fee
- FHA MIP premium
- Hazard or flood insurance programs
- Loan discount points
- Credit report fee (actual cost)
- Appraisal fee (actual fee)
- Interim interest
- Reserves for taxes and insurance
- Notary fee $10.00/ signature
- FHA appraisal compliance inspection fee
- Compliance inspection fee
- Termite (no repairs unless approved in writing by lender. Initial inspection is okay)
- Home warranty (if stipulated in escrow instructions and with prior approval of the lender)
- Tests or treatments that are HUD required (with the prior written approval of the lender)
- Broker fees (with the prior written approval of the lender)
FHA Loan Non Allowables
- Sub escrow fee to the title company
- ALTA endorsement fees
- Other inspection fees are not allowed
- Recording inspection fees
- Processing fees
- Document preparation fees
- Repairs or work required on FHA appraisal (only if approved in writing by the lender)
- Any messenger fee including overnight delivery charges
- loan tie-in fees
- Bring-down fee
- Tax service contract
- Recording assignment fees
- Title binder
- Tax stamps and city transfer tax charges
- Preliminary charge of ownership report
- Home warranty program (unless stipulated in escrow with prior written approval of the lender)
- Photo fee and photo inspection fee
- Transaction coordinator fee
