One percent, and that is the lot
A lender may charge a flat fee of up to 1% of the loan amount — and the regulation is explicit that this charge is “in lieu of all other charges relating to costs of origination not expressly specified and allowed” in the schedule.1
Read that clause again, because it is the whole point. The 1% is not a starting position with processing, underwriting and administration fees stacked on top. It replaces them.
Elsewhere on this site there is a page about the fees worth questioning — processing, underwriting, administration, document preparation. On a conventional loan those are a matter of company policy and you have to ask.
On a VA loan they are covered by the 1%. If they appear as separate lines on top of a full origination charge, that is a question worth asking before anything else gets discussed.
What may be charged in addition
The regulation names the charges that can sit alongside the flat fee. They are third-party costs and specific permitted items, not the lender's own overhead:1
- VA appraiser and compliance inspector fees
- Recording fees and recording taxes
- The credit report
- Deposits for current-year taxes and insurance, and hazard insurance
- A survey, where one is required
- Title examination and title insurance
- Third-party flood zone determination
- Discount points, under the conditions the schedule sets
- Authorized local variances, construction supervision on a build, and an assumption processing fee capped at $300 or actual cost
The flat prohibition
Separately from the cap, the regulation states that “no brokerage or service charge or their equivalent may be charged against the debtor or the proceeds of the loan” — not initially, not periodically, not otherwise. A veteran also cannot be charged a brokerage fee for obtaining the guaranty, or have life insurance premiums paid out of loan proceeds.1
This sits on top of the rule that applies to every loan, VA or not: before you have a Loan Estimate in hand and have said you want to proceed, nobody should be charging you anything beyond a bona fide credit report fee.2 On a VA loan we cannot collect an appraisal fee from you up front at all.
What to do with this. Put two Loan Estimates side by side and look at Section A. On a VA loan, the origination side should be a 1% charge or less, plus discount points if you chose them, and nothing else from the lender. Anything beyond that deserves a specific answer.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
Which mortgage fees are worth questioning?Some closing costs buy a service. Others are overhead with a name on it.The VA funding feeWhat it costs, why the second-use rate jumps, and who doesn't pay it at all.Priced against your actual file
Entitlement, funding fee exemption and what you can actually borrow, worked out properly rather than estimated. We can pull your Certificate of Eligibility for you. Nothing here touches your credit.