Carlos Scarpero, Senior Loan Originator Specializing in VA Loans
A lender may charge you a flat origination fee of up to 1% of the loan amount, plus a short list of VA-approved itemized fees, plus reasonable discount points. Everything else on the lender's own side (document prep, processing, underwriting, notary, escrow fees, and more) has to come out of that 1%, not be billed to you separately. Sellers can also contribute up to 4% of the loan amount toward specific costs, and a VA-approved wood-destroying pest inspection can now be billed to you where the appraisal requires one.
This is for anyone staring at a VA loan estimate and wondering whether the fee section is normal. VA actually publishes what a lender can and cannot charge a veteran borrower. Once you know the rule, you can read your own loan estimate instead of guessing.
A lender can charge you a flat origination fee of up to 1% of the loan amount (or of the payoff amount on an Interest Rate Reduction Refinancing Loan, or IRRRL, using the lender's IRRRL Worksheet calculation). On top of that, you can pay a set list of itemized, VA-approved charges, plus reasonable discount points.
VA HANDBOOK EXCERPT
“In addition to the ‘itemized fees and charges,’ the lender may charge the veteran a flat charge not to exceed one percent of the loan amount.”
That 1% is a hard ceiling on the lender's own flat fee. It's separate from the VA-approved itemized fees below, but the two categories interact: the flat fee is what covers everything the itemized list does not.
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The VA-approved itemized fees you can be charged, on top of the 1% flat charge, include:
These are third-party or pass-through costs, not lender profit, so VA also limits them to what the third party actually charged. The lender can't mark up the appraisal, the credit report, or a survey and keep the difference. If you want the full breakdown of how these categories usually add up on a real transaction, our complete guide to VA closing costs walks through it line by line.
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A specific list of the lender's own overhead items cannot be billed to you as a separate itemized charge, no matter how the origination fee is structured. The lender has to absorb these out of its own 1% flat charge instead.
VA HANDBOOK EXCERPT
“The lender’s flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as ‘itemized fees and charges.’”
In plain terms: certain costs are always on the lender's tab, not yours, whether or not the lender charges the full 1%.
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The list of fees you should never see billed to you directly includes:
If you see any of these as a separate line item on your loan estimate, ask the lender to explain it. It's either mislabeled or it shouldn't be there.
For years, the rule of thumb was that a veteran-purchaser couldn't pay for the termite (wood-destroying pest) inspection, so the seller had to cover it. That's no longer accurate everywhere. In 2022, VA changed this.
VA CIRCULAR EXCERPT
“VA is authorizing in advance, as a local variance, that Veterans may be charged wood destroying pest inspection fees, where required by the NOV. Veterans may also pay for any repairs required to ensure compliance with MPRs.”
If your Notice of Value (NOV) requires a pest inspection, you can be the one who pays for it, and for any repairs the inspection turns up. VA still encourages negotiating that cost with the seller, but it isn't a legal requirement anymore.
Source:
VA Circular 26-22-11, Pest Inspection Fees and Repair Costs (June 15, 2022)
Keep the itemized invoice for the inspection and any repairs. VA wants it in the file to verify the cost shown on your closing disclosure.
Seller concessions on a VA loan are capped at 4% of the loan amount, but that cap only applies to a specific list of items, not to everything a seller might pay.
VA HANDBOOK EXCERPT
“Any seller concession or combination of concessions which exceeds four percent of the established reasonable value of the property is considered excessive, and unacceptable for VA-guaranteed loans.”
The handbook is also specific about what does not count toward that 4%: “Seller concessions do not include payment of the buyer’s closing costs, or payment of points as appropriate to the market.”
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Concessions that count toward the 4% cap include the seller paying your VA funding fee, prepaying your property taxes and insurance, paying off your credit balances or judgments, or funding a temporary interest rate buydown. A seller simply paying your normal closing costs is not a concession under this rule, and neither are discount points paid at a market rate. That gives you more negotiating room than a lot of agents realize when you're working through getting your offer accepted in a competitive market.
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Only in specific situations, and it depends on the loan type. On a regular purchase loan, the loan amount can only include the VA funding fee, not your other closing costs. Refinance loans have more flexibility: a cash-out refinance can pay allowable fees and discount points out of the cash proceeds, and an IRRRL can roll in the funding fee, the lender's flat charge, and other allowable fees, though no more than two discount points can be added to the loan amount on an IRRRL. If you're weighing a refinance and want the specifics for your situation, see our guides to the VA IRRRL streamline refinance, the VA cash-out refinance, and rolling closing costs into a VA loan.
Closing costs vary a lot by state, title company, and lender, so there's no single dollar figure that tells you whether your numbers are "normal." Comparing two loan estimates apples-to-apples is more useful than chasing an average.
If you want to see how a given rate and fee structure plays out over the life of the loan, run your own numbers with our VA mortgage payment calculator.
Out-of-pocket itemized fees you already incurred, like the appraisal and credit report, are not refunded. But if the lender already collected the 1% flat fee from you, the lender has to refund it, even if you end up closing with a different lender instead.
Yes. The seller paying your VA funding fee is specifically listed as a seller concession, so it counts toward the 4% cap along with items like prepaid property taxes, payoff of your credit balances, and temporary buydown funds.
No. The lender can't bill you for its own attorney's fees, but you can independently hire an attorney and pay for that yourself. Your closing documents should make clear that fee is a separate arrangement between you and your attorney, not something the lender charged.
Yes. On construction, alteration, improvement, or repair loans, the lender can add up to an extra 1% or 2% flat charge on top of the standard 1%, depending on whether the lender supervises construction progress or advances more than half the loan during construction. That can bring the maximum lender flat charge to 2% or 3% of the loan amount instead of 1%.
No. Third-party charges, including the appraisal, are limited to the actual amount the third party charged. The lender can't add a markup or handling charge and keep the difference.
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Can you use a VA loan on a deed-restricted affordable home? What VA’s resale-restriction and marketability rules require, and what to check before you sign.
Sellers worry VA appraisals run low and closings drag. What the VA Lender’s Handbook actually says, and how to make your VA offer competitive anyway.
H.R. 9237 would raise the VA IRRRL funding fee. What the bill text actually says, where it stands as of August 15 2026, and what it means for your refinance.
Take the 30 second mortgage quiz to see if you qualify
