As a VA buyer, you can’t be charged any lender fee that isn’t on the short “allowable” list in 38 CFR 36.4313, and the lender’s total origination-related charges to you are capped at 1% of the loan amount. Federal regulation uses a whitelist: only fees the rule specifically permits can be passed to the veteran, and everything else — processing, underwriting, document preparation, settlement fees, and dozens of similar charges — has to be absorbed by the lender, paid by the seller, or waived. So the closing costs VA buyers are not allowed to pay are, in short, anything the regulation doesn’t expressly authorize.1eCFR. 38 CFR 36.4313 – Charges and Fees
The VA won’t guarantee the loan unless the lender certifies it hasn’t charged, and won’t charge, anything beyond what the regulation permits. That’s the enforcement lever behind the whole system.
The Specific Fees You Cannot Be Charged
Most of the prohibited charges are internal lender costs that would be itemized on a conventional loan. On a VA loan, they’re rolled into the flat origination fee (or simply absorbed) and cannot appear as separate line items on your Loan Estimate or Closing Disclosure:
- Loan application fees
- Processing fees
- Underwriting fees
- Document preparation fees
- Rate lock fees
- Settlement and closing fees
- Escrow and notary fees
- Postage and courier charges
- Photograph fees
- Tax service fees
- Broker or trustee fees
- Prepayment penalty costs on an existing loan against the property
VA Circular 26-10-01 specifically flags document preparation as a charge that must be refunded if it shows up alongside an origination fee.2Veterans Benefits Administration. Circular 26-10-01 – Impact of New RESPA Rule on Fees and Charges for VA Loans
Attorney fees for settlement work are also non-allowable. There is one narrow exception: if an attorney performs the title examination, you can be charged for that specific service, because title examination itself is on the allowable list.2Veterans Benefits Administration. Circular 26-10-01 – Impact of New RESPA Rule on Fees and Charges for VA Loans
If the lender orders a second appraisal or a separate inspection for its own underwriting purposes, you can’t be billed for that either. You’re only responsible for the mandatory VA appraisal.
How the 1% Origination Cap Works
The reason internal lender fees can’t be itemized is that they’re supposed to be covered by a single capped origination charge. Under VA rules, the lender has two options. It can charge a flat origination fee of up to 1% of the loan amount and bundle all of its internal costs inside that fee. Or it can skip the flat fee and itemize its individual lender-side charges — but the total still cannot exceed 1% of the loan amount.2Veterans Benefits Administration. Circular 26-10-01 – Impact of New RESPA Rule on Fees and Charges for VA Loans
Either way, the 1% ceiling applies. On a $400,000 loan, that means a maximum lender charge of $4,000. If you see a Loan Estimate where the origination fee plus separate lender-side charges add up to more than 1% of the loan amount, question it right away.
One important scope note: the 1% cap applies only to lender-side charges. Third-party allowable costs — the VA appraisal, title work, recording fees, credit report, survey, flood zone determination, discount points, and prepaid items like insurance and taxes — sit outside the cap and can be billed as separate line items at their actual cost. The credit report, for instance, must be passed through at the lender’s actual cost with no markup.3Veterans Benefits Administration. Circular 26-14-36 – Credit Report and Automated Underwriting System Fee Policy Every third-party charge has to match the actual invoiced amount, and lenders must keep those invoices in the loan file for VA audits.4Veterans Benefits Administration. Circular 26-24-19 – Invoice Requirements for Itemized Fees and Charges
Real Estate Brokerage Fees: A Recent Change
Real estate brokerage commissions were flatly non-allowable for VA buyers for decades under 38 CFR 36.4313.1eCFR. 38 CFR 36.4313 – Charges and Fees The seller’s side of the transaction typically paid the buyer’s agent, so the prohibition rarely caused problems.
That changed after the 2024 National Association of Realtors class-action settlement, which restructured how brokerage commissions work nationwide. Sellers are no longer required to offer compensation to buyer agents. In response, the VA issued Circular 26-24-14, a temporary variance that allows veterans to pay reasonable and customary buyer-broker fees on purchase contracts executed on or after August 10, 2024.5Veterans Benefits Administration. LGY NAR Updates These charges cannot be rolled into the loan amount; they have to be paid separately. The variance stays in effect until the VA rescinds it.6Veterans Benefits Administration. Circular 26-24-14 Change 1
The practical takeaway: buyer-agent compensation is one closing cost you can now legitimately pay as a VA buyer, though the seller can still agree to cover it in your purchase agreement, and many do.
Who Actually Pays the Prohibited Fees
Prohibited fees don’t disappear. The work still gets done and the costs are real; the rule just says the veteran isn’t the one paying. Two mechanisms handle the shift.
Seller Concessions
The seller can pay all of your allowable closing costs — every dollar of title insurance, recording fees, prepaid taxes, the VA appraisal, even discount points — with no VA cap on that portion.7Veterans Affairs – VA.gov. VA Funding Fee And Loan Closing Costs
A separate 4% cap applies to seller concessions beyond normal closing costs. Those extras include things like paying your VA funding fee, covering prepaid hazard insurance, or paying off your existing debts. The 4% is calculated against the home’s reasonable value shown on the VA Notice of Value, not the loan amount or the sale price.7Veterans Affairs – VA.gov. VA Funding Fee And Loan Closing Costs
Lender Credits
Lender credits trade a slightly higher interest rate for upfront cash applied to your closing costs. The VA does not cap lender credits toward closing costs.7Veterans Affairs – VA.gov. VA Funding Fee And Loan Closing Costs
There is a key restriction, though. Credits generated through premium pricing cannot be applied to non-allowable fees.8Veterans Benefits Administration. Circular 26-15-6 – HUD-1 Itemization Requirements Non-allowable fees are already the lender’s problem, built into the 1% origination cap, so a lender credit can’t be used to route those costs back to the veteran through the back door. Lender credits are useful for covering allowable third-party costs like title insurance, the appraisal, or prepaid taxes.
What to Do If a Prohibited Fee Shows Up
If you spot a non-allowable fee on your Loan Estimate or Closing Disclosure, flag it with your loan officer right away. Most of the time it gets removed or reclassified before closing.
If a prohibited fee makes it onto the final Closing Disclosure and you’ve already closed, the lender has to refund the overcharge. The VA requires lenders to keep invoices supporting every itemized fee, and if the lender can’t produce an invoice to back a charge, a refund is due.4Veterans Benefits Administration. Circular 26-24-19 – Invoice Requirements for Itemized Fees and Charges The same rule catches inflated third-party charges: if the Closing Disclosure amount exceeds what the provider actually billed, the difference has to be returned.
The VA also conducts post-closing audits called Full File Loan Reviews, checking that every charge was allowable and documented. If you think you were overcharged and the lender isn’t cooperating, contact your VA Regional Loan Center or file a complaint through the VA’s housing assistance channels. Lenders that consistently overcharge risk losing VA-approved status, so the incentive to fix a legitimate complaint is real.