Welcome, veterans! If you’re planning to buy a home with a VA loan in 2025, it’s important to understand how non-allowable fees can keep more money in your pocket.
These fees are costs that lenders are not allowed to charge you, thanks to specific rules set by the Department of Veterans Affairs (VA).
In this guide, we’ll break down everything you need to know—from which fees are off-limits to how you can spot any hidden charges.
What Are Non-Allowable Fees for VA Home Loans?
Non-allowable fees are charges that lenders cannot pass on to veteran borrowers. These include certain legal fees, extra inspection costs, and other expenses that the VA says must be paid by someone else (usually the seller or lender).
The Department of Veterans Affairs sets guidelines to protect veterans from paying too many upfront costs when buying a home. These guidelines specify which fees are off-limits, such as attorney fees, prepayment penalties, and certain inspection fees.
By preventing lenders from adding these charges to your closing costs, the VA ensures you keep more of your money—one of the biggest perks of using a VA loan.
Example: A fellow veteran was charged an attorney fee of $1,200 during closing. Because of VA regulations, this charge had to be removed, saving that veteran $1,200 immediately.
Why VA Loans Limit Fees
VA loans limit fees to make homeownership more affordable for veterans, effectively acting as a “thank you” for your service.
Buying a home can come with 2%–5% in closing costs on a conventional loan. With VA loans, many of these costs can be reduced or eliminated. By disallowing certain fees, the VA ensures veterans aren’t burdened with extra expenses. In some cases, the seller can even cover allowable closing costs up to a certain percentage (commonly up to 4% of the loan amount).
Example: A Texas veteran purchased a $400,000 home with a VA loan and paid just $2,500 in closing costs, while a similar conventional loan might have cost $10,000. This difference highlights how VA loan rules help veterans save.
Complete List of Non-Allowable Fees
Here are the most common fees you cannot be charged when using a VA loan in 2025.
- Attorney Fees: Costs related to the lender’s attorney (usually $500–$1,500) must be paid by the lender, not the veteran.
- Prepayment Penalties: VA rules forbid extra charges for paying off your loan early.
- HUD/FHA Inspection Fees: The VA appraisal typically covers necessary inspections, so additional fees are not allowed.
- Broker Fees: Third-party broker commissions (often $1,000–$2,000) are not chargeable to the veteran buyer.
- Settlement Fees: Fees for the closing agent or escrow (often $200–$400) must be handled by the lender or seller.
Real Scenario: A seller once tried to include a $600 broker fee in a veteran’s closing costs. VA regulations prevented that expense from being passed on to the veteran.
How Non-Allowable Fees Affect Closing Costs
Non-allowable fees help lower your overall closing costs, making it more affordable to buy a home with a VA loan.
- Shifts Costs Elsewhere: Since these fees can’t be charged to you, the lender or seller often covers them.
- 1% Origination Fee Cap: Lenders can only charge up to 1% of the loan amount for origination, preventing extra markups.
- Seller Concessions: Sellers can contribute up to 4% of the loan amount to help with allowable closing costs, further reducing your out-of-pocket expenses.
Example: A veteran had an estimated $5,000 in closing costs on a $300,000 VA loan, but after removing non-allowable fees and using seller concessions, the final bill dropped to $2,800.
What Fees Can Lenders Charge?
Not all fees are banned. The VA allows certain costs that are necessary for processing and securing your mortgage.
Allowable Fees Include:
-
VA Funding Fee:
- Ranges from about 1.25% to 3.3% of your loan amount (e.g., $3,750–$9,900 on a $300,000 loan).
- You can roll this into your loan, so you don’t always pay it upfront.
- Tip: Some veterans are exempt (e.g., those receiving VA disability compensation).
-
Appraisal Fee:
- Typically $400–$600, required by the VA to confirm the home’s value.
-
Title Insurance:
- Generally $500–$1,500, protects you and the lender from legal issues with property ownership.
-
Credit Report Fee:
- About $25–$50, covers the cost of pulling your credit information.
-
Recording Fees:
- Usually $100–$300, paid to the county to record the property’s deed and mortgage documents.
Example: One veteran was charged $400 for an appraisal, which is standard. The difference is that certain extra fees (like a broker fee) are disallowed by the VA.
How to Spot and Avoid Non-Allowable Fees
Read your loan documents carefully, ask questions, and use your VA resources to challenge any suspicious charges.
- Review Your Loan Estimate: Inspect every line item. If you see “attorney fee” or “broker fee,” check if it’s truly your responsibility.
- Ask Your Lender: Don’t be shy—ask, “Is this fee VA-allowable?” If they’re unsure, request clarity in writing.
- Negotiate: You can often request that the seller cover certain closing costs, especially if the fee is non-allowable.
- Contact the VA: If you have doubts, call the VA directly at 877-827-3702. They can confirm whether a fee is non-allowable.
Example: A veteran caught a $700 settlement fee on their loan estimate. After a quick call to the lender—and a reference to VA guidelines—that fee was removed.
Real-World Examples of Non-Allowable Fee Savings
Actual savings vary, but many veterans report saving between $500 and $2,000 just by avoiding non-allowable fees.
-
Texas Vet (Loan Amount: $300,000)
- Saved $1,200 in attorney fees.
- Total closing costs dropped to $2,500.
-
California Buyer (Loan Amount: $500,000)
- Avoided an $800 broker fee.
- Seller covered an additional $3,000 in closing costs.
-
Florida Retiree (Loan Amount: $400,000)
- Freed up $500 by removing a HUD inspection fee.
- Final closing costs ended up at $3,800.
Frequently Asked Questions
What are non-allowable fees for VA home loans?
These are fees the VA won’t let lenders charge to veteran borrowers—such as lender attorney fees, prepayment penalties, and certain inspection costs.
Why can’t lenders charge certain fees on VA loans?
The VA created these rules to protect veterans from excessive closing costs and to ensure affordability.
How much can I save with non-allowable fees?
Savings can range from $500 to over $2,000, depending on your loan amount and location.
Can sellers pay non-allowable fees for VA loans?
Yes. Sellers can offer concessions of up to 4% of the loan amount, covering various fees—including non-allowable costs.
What’s the difference between allowable and non-allowable fees?
Allowable fees are standard costs you can pay (e.g., funding fee, appraisal, credit report). Non-allowable fees are barred by the VA (e.g., lender’s attorney fee, settlement fee).
How do I know if a fee is non-allowable?
Review your loan estimate and look for terms like “attorney,” “broker,” or “settlement fee.” If you’re unsure, ask your lender or call the VA.
Can I negotiate non-allowable fees with my lender?
Absolutely. If you spot a questionable fee, you can push back or ask the seller to cover it. The VA can also provide support if the lender resists.
Do non-allowable fees apply to VA refinances, too?
Yes, these guidelines apply to Interest Rate Reduction Refinance Loans (IRRRL) and cash-out refinances. Many of the same fees remain off-limits.
Allowable vs. Non-Allowable Fees Chart
| Fee Type | Allowable? | Cost Range | Who Pays |
|---|---|---|---|
| VA Funding Fee | Yes | $3,750–$9,900 | Buyer (can be rolled into loan) |
| Appraisal | Yes | $400–$600 | Buyer |
| Attorney Fees | No | $500–$1,500 | Lender or Seller |
| Prepayment Penalty | No | $1,000+ | N/A |
| Title Insurance | Yes | $500–$1,500 | Buyer |
| Broker Fees | No | $1,000–$2,000 | Lender or Seller |
(Tip: Always confirm costs with your lender or real estate professional. For more on these fees, see our In-Depth VA Loan Fee Guide.)
Closing Cost Comparison Chart
| Loan Type | Total Closing Costs | Non-Allowable Savings | Net Buyer Cost |
|---|---|---|---|
| VA ( $300K ) | $6,000–$9,000 | $1,000–$2,000 | $4,000–$7,000 |
| Conventional | $6,000–$15,000 | $0 | $6,000–$15,000 |
Key Insight: VA non-allowable fees can greatly reduce the amount you pay at closing, often resulting in significant savings compared to conventional loans.
Summary and Key Takeaways
- Non-allowable fees are a major advantage of the VA loan program, preventing certain charges from ending up in your closing costs.
- VA limits fees to make homeownership more affordable for veterans, often saving you thousands of dollars.
- Seller concessions can cover many allowable fees, further reducing what you pay at closing.
- Check your loan estimates carefully, ask questions, and don’t hesitate to call the VA for clarification if a fee seems suspicious.
- Stay informed about your rights and benefits. If you spot something questionable, you have every right to challenge it or request that the seller or lender cover the cost.
Next Steps for Veteran Homebuyers
- Connect with a VA-Approved Lender: Look for lenders experienced with VA loans to ensure they follow VA fee rules.
- Review Our VA Loan Resource Center: Click here to learn more about VA funding fees, appraisal processes, and more.
- Contact the VA: Dial 877-827-3702 or visit va.gov if you have any questions or concerns.
- Talk to a Trusted Real Estate Agent: Choose an agent who understands VA loans and can help negotiate better terms and concessions for you.
Buying a home is a big milestone—your service has earned you valuable benefits that make it easier and more affordable. By knowing the rules on non-allowable fees, you’ll be well on your way to enjoying your new home without unnecessary extra costs. Thank you for your service, and happy house hunting!
