## Chapter 8 Borrower Fees and Charges and the VA Funding Fee

#### Overview

+------------+---------------------------------------------------------+
| ##### In   | > This chapter contains information about borrower fees |
| troduction | > and charges and the VA funding fee.                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > This chapter contains the following topics.           |
| #### In th |                                                         |
| is Chapter |                                                         |
+------------+---------------------------------------------------------+

  ---------------------------------------------------------- ------------
  Topic                                                      See Page

  8.01 VA Policy on Fees and Charges Paid by the             8-2
  Veteran-Borrower                                           

  8.02 Fees and Charges the Veteran-Borrower Can Pay         8-3

  8.03 Fees and Charges the Veteran-Borrower Cannot Pay      8-9

  8.04 Other Parties Fees and Charges for the                8-11
  Veteran-Borrower                                           

  8.05 Seller Concessions                                    8-12

  8.06 What Happens to Fees and Charges If the Loan Never    8-14
  Closes                                                     

  8.07 Fees and Charges That Can be Included In the Loan     8-15
  Amount                                                     

  8.08 The VA Funding Fee                                    8-17
  ---------------------------------------------------------- ------------

#### Number range chapter8.01 VA Policy on Fees and Charges Paid by the Veteran-Borrower

+------------+---------------------------------------------------------+
| ##         | > The VA home loan program involves a veteran's         |
| ### Policy | > benefit. VA policy has evolved around the objective   |
|            | > of helping the veteran to use his or her home loan    |
|            | > benefit. Therefore, VA regulations limit the fees     |
|            | > that the veteran can pay to obtain a loan.            |
|            | >                                                       |
|            | > Lenders must **strictly** adhere to the limitations   |
|            | > on borrower-paid fees and charges when making VA      |
|            | > loans.                                                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > In order to defray the cost of administering the VA   |
| # The VA F | > home loan program, each veteran must pay a funding    |
| unding Fee | > fee to VA at loan closing.                            |
|            | >                                                       |
|            | > Congress may periodically change the funding fee      |
|            | > rates to reflect changes in the cost of administering |
|            | > the program, or to assist a certain class of          |
|            | > veterans.                                             |
+------------+---------------------------------------------------------+

#### 8.02 Fees and Charges the Veteran-Borrower Can Pay

+------------+---------------------------------------------------------+
| ##### VA R | > VA regulations at [38 CFR 36.4312]{.underline}        |
| egulations | > provide the list of fees and charges that the veteran |
|            | > can pay.                                              |
|            | >                                                       |
|            | > **[\[38 CFR 36.4312\]]{.underline}**                  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > The veteran can pay a maximum of                      |
| # Overview |                                                         |
|            | -   reasonable and customary amounts for any or all of  |
|            |     the "Itemized Fees and Charges" designated by VA,   |
|            |     plus                                                |
|            |                                                         |
|            | -   a 1% flat charge by the lender, plus                |
|            |                                                         |
|            | -   reasonable discount points.                         |
|            |                                                         |
|            |     > ***Note***: Some special provisions apply to      |
|            |     > construction, alteration, improvement and repair  |
|            |     > loans                                             |
|            |                                                         |
|            |     > ***Reference***: For more information, refer to   |
|            |     > the topic "Construction Loans" in this section.   |
+------------+---------------------------------------------------------+

+------------+---+---------+---------------------------------------------+---+
| ##         | > |         |                                             |   |
| ### Itemiz |   |         |                                             |   |
| ed Fees an | T |         |                                             |   |
| d Charges  | h |         |                                             |   |
| {#itemized | e |         |                                             |   |
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|            | . |         |                                             |   |
+------------+---+---------+---------------------------------------------+---+
|            |   | Charge  | Description                                 |   |
+------------+---+---------+---------------------------------------------+---+
|            |   | Ap      | The veteran can pay the fee of a VA         |   |
|            |   | praisal | appraiser and VA compliance inspectors.     |   |
|            |   | and     |                                             |   |
|            |   | Com     | -   The veteran can also pay for a second   |   |
|            |   | pliance |     appraisal if he or she is requesting    |   |
|            |   | Insp    |     reconsideration of value.               |   |
|            |   | ections |                                             |   |
|            |   |         | -   The veteran cannot pay for an appraisal |   |
|            |   |         |     requested by the lender or seller for   |   |
|            |   |         |     reconsideration of value.               |   |
|            |   |         |                                             |   |
|            |   |         | -   The veteran cannot pay for appraisals   |   |
|            |   |         |     requested by parties other than the     |   |
|            |   |         |     veteran or lender.                      |   |
+------------+---+---------+---------------------------------------------+---+
|            |   | Re      | The veteran can pay for recording fees and  |   |
|            |   | cording | recording taxes or other charges incident   |   |
|            |   | Fees    | to recordation.                             |   |
+------------+---+---------+---------------------------------------------+---+

Continued on next page

8.02 Fees and Charges the Veteran-Borrower Can Pay, Continued

  -----------------------------------------------------------------------
  Itemized Fees and Charges (continued)

  -----------------------------------------------------------------------

+------------+---------------------------------------------------------+
| Charge     | Description                                             |
+------------+---------------------------------------------------------+
| Credit     | > The veteran can pay for the credit report obtained by |
| Report     | > the lender.                                           |
|            |                                                         |
|            | > On Loan Prospector cases, the veteran may pay the     |
|            | > evaluation fee of \$50 in lieu of the charge for a    |
|            | > credit report. For "Refer" cases, the veteran may     |
|            | > also pay the charge for a merged credit report, if    |
|            | > required.                                             |
+------------+---------------------------------------------------------+
| Prepaid    | The veteran can pay that portion of taxes, assessments, |
| Items      | and similar items for the current year chargeable to    |
|            | the borrower and the initial deposit for the tax and    |
|            | insurance account.                                      |
+------------+---------------------------------------------------------+
| Hazard     | The veteran can pay the required hazard insurance       |
| Insurance  | premium. This includes flood insurance, if required.    |
+------------+---------------------------------------------------------+
| Flood Zone | The veteran can pay the actual amount charged for a     |
| Dete       | determination of whether a property is in a special     |
| rmina-tion | flood hazard area, if made by a third party who         |
|            | guarantees the accuracy of the determination.           |
|            |                                                         |
|            | -   The veteran can pay a charge for a life-of-the-loan |
|            |     flood determination service purchased at the time   |
|            |     of loan origination.                                |
|            |                                                         |
|            | -   A fee may **not** be charged for a flood zone       |
|            |     determination made by the lender or a VA appraiser. |
+------------+---------------------------------------------------------+
| Survey     | The veteran can pay a charge for a survey, if required  |
|            | by the lender or veteran.                               |
|            |                                                         |
|            | > Any charge for a survey in connection with a          |
|            | > condominium loan must have the prior approval of VA.  |
+------------+---------------------------------------------------------+
| Title      | The veteran may pay a fee for title examination and     |
| E          | title insurance, if any.                                |
| xamination |                                                         |
| and Title  | > If the lender decides that an environmental           |
| Insurance  | > protection lien endorsement to a title policy is      |
|            | > needed, the cost of the endorsement may be charged to |
|            | > the veteran.                                          |
+------------+---------------------------------------------------------+

Continued on next page

8.02 Fees and Charges the Veteran-Borrower Can Pay, Continued

  -----------------------------------------------------------------------
  Itemized Fees and Charges (continued)

  -----------------------------------------------------------------------

+------------+---------------------------------------------------------+
| Charge     | Description                                             |
+------------+---------------------------------------------------------+
| Special    | For refinancing loans only, the veteran can pay charges |
| Mailing    | for Federal Express, Express Mail, or a similar service |
| Fees for   | when the saved per diem interest cost to the veteran    |
| R          | will exceed the cost of the special handling.           |
| efinancing |                                                         |
| Loans      |                                                         |
+------------+---------------------------------------------------------+
| VA Funding | Unless exempt from the fee, each veteran must pay a     |
| Fee        | funding fee to VA.                                      |
+------------+---------------------------------------------------------+
| Other Fees | > Additional fees attributable to local variances may   |
| Authorized | > be charged to the veteran **only** if specifically    |
| by VA      | > authorized by VA.                                     |
|            |                                                         |
|            | > The lender may request VA to approve such a fee if it |
|            | > is                                                    |
|            |                                                         |
|            | -   normally paid by the borrower in a particular       |
|            |     jurisdiction, and                                   |
|            |                                                         |
|            | -   considered reasonable and customary in the          |
|            |     jurisdiction.                                       |
+------------+---------------------------------------------------------+

+-----------------------------------------------------------------------+
| > Whenever the charge relates to services performed by a third party, |
| > the amount paid by the borrower must be limited to the actual       |
| > charge of that third party.                                         |
|                                                                       |
| > ***Example***: If the lender obtains a credit report at a cost of   |
| > \$30, the lender may only charge the borrower \$30 for the credit   |
| > report. The lender may **not** charge \$35, even if it believes     |
| > that a \$5 handling charge is fair.                                 |
|                                                                       |
| > In addition, the borrower may **not** pay a duplicate fee for       |
| > services that have already been paid for by another party.          |
|                                                                       |
| > ***Examples***:                                                     |
|                                                                       |
| -   An appraisal is completed on a property and paid for by a         |
|     prospective purchaser, but the sale is never completed. A second  |
|     purchaser applies for a loan before the validity period of the    |
|     Certificate of Reasonable Value (CRV) expires. The lender uses    |
|     the same CRV. The lender may **not** charge the second purchaser  |
|     an appraisal fee if no second appraisal is ordered.               |
|                                                                       |
| -   A survey or flood zone determination, if the lender elects to use |
|     an existing survey or flood determination.                        |
+-----------------------------------------------------------------------+

Continued on next page

8.02 Fees and Charges the Veteran-Borrower Can Pay, Continued

+------------+---------------------------------------------------------+
| #####      | > In addition to the "itemized fees and charges," the   |
| Lender's 1 | > lender may charge the veteran a flat charge not to    |
| % Flat Cha | > exceed 1% of the loan amount.                         |
| rge {#lend |                                                         |
| ers-1-flat | -   Calculate the 1% on the principal amount after      |
| -charge .u |     adding the funding fee to the loan, if the funding  |
| nnumbered} |     fee is paid from loan proceeds (except IRRRLs).\    |
|            |     \                                                   |
|            |     ***Note***: For IRRRLs, use [VA Form                |
|            |                                                         |
|            | 26-8923](http://www.vba.va.gov/pubs/forms/26-8923.pdf), |
|            |     IRRRL Worksheet for the Calculation.                |
|            |                                                         |
|            |     > 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."                                         |
|            |                                                         |
|            |     > The following list provides examples of items     |
|            |     > that cannot be charged to the veteran as          |
|            |     > "itemized fees and charges." Instead, the lender  |
|            |     > must cover any cost of these items out of its     |
|            |     > flat fee.                                         |
|            |                                                         |
|            | -   Lender's appraisals                                 |
|            |                                                         |
|            | -   Lender's inspections, except in construction loan   |
|            |     cases                                               |
|            |                                                         |
|            | -   loan closing or settlement fees                     |
|            |                                                         |
|            | -   document preparation fees                           |
|            |                                                         |
|            | -   Preparing loan papers or conveyancing fees          |
|            |                                                         |
|            | -   Attorney's services other than for title work       |
|            |                                                         |
|            | -   photographs                                         |
|            |                                                         |
|            | -   interest rate lock-in fees                          |
|            |                                                         |
|            | -   postage and other mailing charges, stationery,      |
|            |     telephone calls, and other overhead                 |
|            |                                                         |
|            | -   amortization schedules, pass books, and membership  |
|            |     or entrance fees                                    |
|            |                                                         |
|            | -   escrow fees or charges                              |
+------------+---------------------------------------------------------+

Continued on next page

8.02 Fees and Charges the Veteran-Borrower Can Pay, Continued

+------------+---------------------------------------------------------+
| ##### Le   | > ***Examples of items that cannot be charged to the    |
| nder's 1%  | > veteran:***                                           |
| Flat Charg |                                                         |
| e (continu | -   notary fees                                         |
| ed) {#lend |                                                         |
| ers-1-flat | -   commitment fees or marketing fees of any secondary  |
| -charge-co |     purchaser of the mortgage and preparation and       |
| ntinued .u |     recording of assignment of mortgage to such         |
| nnumbered} |     purchaser                                           |
|            |                                                         |
|            | -   trustee's fees or charges                           |
|            |                                                         |
|            | -   loan application or processing fees                 |
|            |                                                         |
|            | -   fees for preparation of truth-in-lending disclosure |
|            |     statement                                           |
|            |                                                         |
|            | -   fees charged by loan brokers, finders or other      |
|            |     third parties whether affiliated with the lender or |
|            |     not, and                                            |
|            |                                                         |
|            | -   tax service fees.                                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Co   | > The lender can charge an additional flat charge on    |
| nstruction | > construction, alteration, improvement, or repair      |
|  Loans {#c | > loans.                                                |
| onstructio |                                                         |
| n-loans .u | -   If the lender supervises the progress of            |
| nnumbered} |     construction and/or makes advances to a veteran in  |
|            |     excess of 50% of the loan during construction,      |
|            |     alteration, improvement, or repair                  |
|            |                                                         |
|            | -   then the lender may charge the veteran up to 2% of  |
|            |     the loan amount in addition to the lender's 1% flat |
|            |     charge.\                                            |
|            |     ***Example***: Total charges to the veteran in      |
|            |     these cases would be, at a maximum, itemized fees   |
|            |     and charges plus a 3% flat charge plus discount     |
|            |     points.                                             |
|            |                                                         |
|            | -   If the lender does not supervise the progress of    |
|            |     construction or make advances to a veteran in       |
|            |     excess of 50% of the loan during construction,      |
|            |     alteration, improvement, or repair                  |
|            |                                                         |
|            | -   then the lender may charge the veteran up to 1% of  |
|            |     the loan amount in addition to the lender's 1% flat |
|            |     charge.\                                            |
|            |     ***Example***: Total charges to the veteran in      |
|            |     these cases would be, at a maximum, itemized fees   |
|            |     and charges plus a 2% flat charge plus discount     |
|            |     points.                                             |
|            |                                                         |
|            |     > This provision also applies to supplemental       |
|            |     > loans.                                            |
+------------+---------------------------------------------------------+

#### 8.03 Fees and Charges the Veteran-Borrower Cannot Pay {#fees-and-charges-the-veteran-borrower-cannot-pay .unnumbered}

+------------+---------------------------------------------------------+
| ##### Lend | > The lender's maximum allowable flat charge of 1% of   |
| er's Use o | > the loan amount (or greater percentage in the case of |
| f 1% Flat  | > construction loans) is intended to cover **all** of   |
| Charge {#l | > the lender's costs and services which are not         |
| enders-use | > reimbursable as "itemized fees and charges." The      |
| -of-1-flat | > lender may pay third parties for services or do as it |
| -charge .u | > wishes with the funds from the flat charge, as long   |
| nnumbered} | > as the lender complies with the Real Estate           |
|            | > Settlement Procedures Act (RESPA).                    |
|            |                                                         |
|            | > Section 8.02 provides some examples of items that     |
|            | > **cannot** be charged to the veteran as "itemized     |
|            | > fees and charges." This topic provides more examples  |
|            | > of items that cannot be paid by the veteran, but can  |
|            | > be paid out of the lender's flat charge or by some    |
|            | > party other than the veteran.                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The lender may **not** charge the borrower for        |
| #### Attor | > attorney's fees. Reasonable fees for title            |
| ney's Fees | > examination work and title insurance can be paid,     |
|  {#attorne | > however, by the borrower. They are allowable itemized |
| ys-fees .u | > fees and charges.                                     |
| nnumbered} |                                                         |
|            | > VA does not intend to prevent the veteran from        |
|            | > seeking independent legal representation. Therefore,  |
|            | > the veteran can independently retain an attorney and  |
|            | > pay a fee for legal services in connection with the   |
|            | > purchase of a home. Closing documents should clearly  |
|            | > indicate that the attorney's fee is **not** being     |
|            | > charged by the lender, but is being paid by the       |
|            | > veteran as part of an independent arrangement with an |
|            | > attorney.                                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Brok | > Fees or commissions charged by a real estate agent or |
| erage Fees | > broker in connection with a VA loan may **not** be    |
|  {#brokera | > charged to or paid by the veteran-purchaser.          |
| ge-fees .u |                                                         |
| nnumbered} | > While use of "buyer" brokers is not precluded,        |
|            | > veteran-purchasers may **not**, under any             |
|            | > circumstances, be charged a brokerage fee or          |
|            | > commission in connection with the services of such    |
|            | > individuals. Since information on property available  |
|            | > for purchase and financing options is widely          |
|            | > available to the public from a variety of sources, VA |
|            | > does not believe that preventing the veteran from     |
|            | > paying buyer-broker fees will harm the veteran.       |
+------------+---------------------------------------------------------+

Continued on next page

8.03 Fees and Charges the Veteran-Borrower Cannot Pay, Continued

+------------+---------------------------------------------------------+
| ##         | > A veteran obtaining a VA refinancing loan cannot use  |
| ### Prepay | > loan proceeds to pay penalty costs for prepayment of  |
| ment Penal | > an existing lien.                                     |
| ties {#pre |                                                         |
| payment-pe | > A veteran purchasing a property with a VA loan cannot |
| nalties .u | > pay penalty costs required to discharge any existing  |
| nnumbered} | > liens on the seller's property.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > In proposed construction cases in which the dwelling  |
| ## HUD/FHA | > was constructed under HUD supervision, the cost of    |
|  Inspectio | > any inspections or reinspections must be borne by the |
| n Fees for | > builder or sponsor and are **not** chargeable to the  |
|  builders  | > veteran-purchaser. This includes:                     |
| {#hudfha-i |                                                         |
| nspection- | -   reinspections by VA or HUD of onsite or offsite     |
| fees-for-b |     work for which an escrow agreement was established, |
| uilders .u |     and                                                 |
| nnumbered} |                                                         |
|            | -   any additional reinspections deemed necessary by VA |
|            |     to assure conformity with VA regulations.           |
+------------+---------------------------------------------------------+

#### 8.04 Other Parties Fees and Charges for the Veteran-Borrower {#other-parties-fees-and-charges-for-the-veteran-borrower .unnumbered}

+------------+---------------------------------------------------------+
| #####      | > The seller, lender, or any other party may pay fees   |
| Policy {#p | > and charges, including discount points, on behalf of  |
| olicy-1 .u | > the borrower.                                         |
| nnumbered} |                                                         |
|            | > VA regulations limit charges "made against or paid    |
|            | > by" the borrower. They do not limit the payment of    |
|            | > fees and charges by other parties.                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Exce | > Excessive seller concessions are prohibited.          |
| ption {#ex |                                                         |
| ception .u | > ***Reference***: See Section 8.05.                    |
| nnumbered} |                                                         |
+------------+---------------------------------------------------------+

#### 8.05 Seller Concessions {#seller-concessions .unnumbered}

+------------+---------------------------------------------------------+
| ##         | > For purposes of this topic, a seller concession is    |
| ### Defini | > anything of value added to the transaction by the     |
| tion {#def | > builder or seller for which the buyer pays nothing    |
| inition .u | > additional and which the seller is **not**            |
| nnumbered} | > customarily expected or required to pay or provide.   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Sell | > Seller concessions include but are not limited to the |
| er Concess | > following:                                            |
| ions {#sel |                                                         |
| ler-conces | -   payment of the buyer's VA funding fee               |
| sions-1 .u |                                                         |
| nnumbered} | -   prepayment of the buyer's property taxes and        |
|            |     insurance                                           |
|            |                                                         |
|            | -   gifts such as a television set or microwave oven    |
|            |                                                         |
|            | -   payment of extra points to provide permanent        |
|            |     interest rate buydowns                              |
|            |                                                         |
|            | -   provision of escrowed funds to provide temporary    |
|            |     interest rate buydowns, and                         |
|            |                                                         |
|            | -   payoff of credit balances or judgments on behalf of |
|            |     the buyer.                                          |
|            |                                                         |
|            |     > Seller concessions do **not** include             |
|            |                                                         |
|            | -   payment of the buyer's closing costs, or            |
|            |                                                         |
|            | -   payment of points as appropriate to the market.\    |
|            |     ***Example***: If the market dictates an interest   |
|            |     rate of 7½% with 2 discount points, the seller's    |
|            |     payment of the 2 points would **not** be a seller   |
|            |     concession. If the seller paid 5 points, 3 of these |
|            |     points would be considered a seller concession.     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > In some localities, builders or sellers offer         |
| # The Prob | > concessions as a competitive tool. In extreme cases,  |
| lem {#the- | > the concessions may entice unwary and unqualified     |
| problem .u | > veterans into home mortgages they cannot afford. The  |
| nnumbered} | > concessions may disguise the veteran's inability to   |
|            | > qualify for the loan.                                 |
+------------+---------------------------------------------------------+

Continued on next page

8.05 Seller Concessions, Continued

+------------+---------------------------------------------------------+
| #####      | > Any seller concession or combination of concessions   |
|  The 4% Li | > which exceeds 4% of the established reasonable value  |
| mit {#the- | > of the property is considered excessive, and          |
| 4-limit .u | > unacceptable for VA-guaranteed loans.                 |
| nnumbered} |                                                         |
|            | > Do **not** include normal discount points and payment |
|            | > of the buyer's closing costs in total concessions for |
|            | > determining whether concessions exceed the 4% limit.  |
+------------+---------------------------------------------------------+

#### 8.06 What Happens to Fees and Charges If the Loan Never Closes {#what-happens-to-fees-and-charges-if-the-loan-never-closes .unnumbered}

+------------+---------------------------------------------------------+
| ####       | > The borrower's out-of-pocket expenses for itemized    |
| # Itemized | > fees and charges already incurred, such as the        |
|  Fees and  | > appraisal and credit report, do **not** get refunded. |
| Charges {# |                                                         |
| itemized-f |                                                         |
| ees-and-ch |                                                         |
| arges-1 .u |                                                         |
| nnumbered} |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > If the lender has already collected the 1% flat fee   |
| #### 1% Fl | > from the borrower, the lender **must** refund the     |
| at Fee {#f | > fee. This applies to a loan that does not close for   |
| lat-fee .u | > any reason, including the borrower going to another   |
| nnumbered} | > lender.                                               |
+------------+---------------------------------------------------------+

#### 8.07 Fees and Charges That Can be Included In the Loan Amount {#fees-and-charges-that-can-be-included-in-the-loan-amount .unnumbered}

+------------+---------------------------------------------------------+
| #####      | > For all types of VA loans, the loan amount may        |
| All VA Loa | > include the VA funding fee.                           |
| ns {#all-v |                                                         |
| a-loans .u | > No other fees and charges or discount points may be   |
| nnumbered} | > included in the loan amount for regular purchase or   |
|            | > construction loans.                                   |
|            |                                                         |
|            | > Only refinancing loans may include other allowable    |
|            | > fees and charges and discount points in the loan      |
|            | > amount.                                               |
|            |                                                         |
|            | > ***Note***: Maximum loan amounts are discussed in     |
|            | > Section 3.03.                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > For "cash-out" refinancing loans, allowable fees and  |
| "Cash-out" | > charges and discount points (as discussed in Section  |
|  Refinanci | > 8.02) may be paid from cash proceeds of the loan, as  |
| ng Loans { | > long as total loan proceeds do **not** exceed 90% of  |
| #cash-out- | > the reasonable value of the property.                 |
| refinancin |                                                         |
| g-loans .u | > Only the VA funding fee (and the cost of any energy   |
| nnumbered} | > efficiency improvements) can be added to the 90%      |
|            | > limit to increase the loan amount.                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > The following fees and charges may be included in an  |
| # IRRRLs { | > Interest Rate Reduction Refinancing Loan (IRRRL):     |
| #irrrls .u |                                                         |
| nnumbered} | -   Any allowable fees and charges discussed in Section |
|            |     8.02. This includes closing costs from the          |
|            |     "Itemized Fees and Charges" list, the funding fee,  |
|            |     and the lender's flat charge.                       |
|            |                                                         |
|            | -   However, there is **one** limitation unique to      |
|            |     IRRRLs: While the borrower may pay any reasonable   |
|            |     amount of discount points in cash, no more than two |
|            |     discount points can be included in the loan amount. |
+------------+---------------------------------------------------------+

Continued on next page

8.07 Fees and Charges That Can be Included In the Loan Amount, Continued

+------------+---------------------------------------------------------+
| ##### Ot   | > The following information applies to any loan to      |
| her Refina | > refinance:                                            |
| ncing Loan |                                                         |
| s {#other- | -   A construction loan                                 |
| refinancin |                                                         |
| g-loans .u | -   an installment land sales contract, or              |
| nnumbered} |                                                         |
|            | -   a loan assumed by the veteran at an interest rate   |
|            |     higher than that for the proposed refinancing loan. |
|            |                                                         |
|            |     > The loan amount may include                       |
|            |                                                         |
|            | -   any allowable fees and charges discussed in Section |
|            |     8.02, and                                           |
|            |                                                         |
|            | -   reasonable discount points.                         |
|            |                                                         |
|            |     > **However,** maximum loan limits may not allow    |
|            |     > inclusion of the full amount of these items.      |
|            |                                                         |
|            |     > The maximum loan amount will be the lesser of the |
|            |                                                         |
|            | -   sum of the outstanding balance of the loan being    |
|            |     refinanced plus allowable fees and charges (other   |
|            |     than the funding fee) plus discount points, or      |
|            |                                                         |
|            | -   VA reasonable value of the property, plus           |
|            |                                                         |
|            | -   VA funding fee, plus                                |
|            |                                                         |
|            | -   cost of any energy efficiency improvements.         |
+------------+---------------------------------------------------------+

#### 8.08 The VA Funding Fee {#the-va-funding-fee-1 .unnumbered}

+------------+---------------------------------------------------------+
| #####      | > The lender must                                       |
|  The Lende |                                                         |
| r's Role { | -   verify the status of any veteran who may be exempt  |
| #the-lende |     from paying the funding fee                         |
| rs-role .u |                                                         |
| nnumbered} | -   determine the amount of funding fee owed by any     |
|            |     non-exempt borrower                                 |
|            |                                                         |
|            | -   collect the appropriate fee from all non-exempt     |
|            |     borrowers at loan closing\                          |
|            |     \                                                   |
|            |     ***Note***: The funding fee may be paid from loan   |
|            |     proceeds or borrower cash.                          |
|            |                                                         |
|            | -   remit the funds to VA in a timely manner            |
|            |                                                         |
|            | -   obtain proof of payment of the funding fee, and     |
|            |                                                         |
|            | -   submit proof that the funding fee has been paid or  |
|            |     that the veteran is exempt from paying the funding  |
|            |     fee to VA with the closed loan package              |
|            |                                                         |
|            |     > ***Reference***: For detailed instructions about  |
|            |     > how to remit the funding fee and provide proof of |
|            |     > payment with the closed loan package, refer to    |
|            |     > Appendix C of this handbook                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > The following persons are exempt from paying the      |
|  Who is Ex | > funding fee:                                          |
| empt from  |                                                         |
| Paying the | -   Veterans receiving VA compensation for              |
|  Funding F |     service-connected disabilities.                     |
| ee? {#who- |                                                         |
| is-exempt- | -   Veterans who would be entitled to receive           |
| from-payin |     compensation for service-connected disabilities if  |
| g-the-fund |     they did not receive retirement pay.                |
| ing-fee .u |                                                         |
| nnumbered} | -   Surviving spouses of veterans who died in service   |
|            |     or from service-connected disabilities (whether or  |
|            |     not such surviving spouses are veterans with their  |
|            |     own entitlement and whether or not they are using   |
|            |     their own entitlement on the loan).                 |
+------------+---------------------------------------------------------+

Continued on next page

8.08 The VA Funding Fee, Continued

+------------+---------------------------------------------------------+
| #####      | > The lender must verify exempt status by obtaining one |
| How to Ver | > of the following:                                     |
| ify Exempt |                                                         |
|  Status {# | -   A properly completed and signed [VA Form 26-8937,   |
| how-to-ver |     Verification of VA Benefit-Related                  |
| ify-exempt |     Indebtedness]{.underline}, indicating the           |
| -status .u |     borrower's exempt status                            |
| nnumbered} |                                                         |
|            | -   an award letter issued within 1 year of the date of |
|            |     the loan application indicating the veteran is      |
|            |     entitled to receipt of VA disability compensation   |
|            |                                                         |
|            | -   for a veteran who elected service retirement pay    |
|            |     instead of VA compensation, a copy of the original  |
|            |     VA notification of disability rating and            |
|            |     documentation of the veteran's service retirement   |
|            |     income, or                                          |
|            |                                                         |
|            | -   indications on the Certificate of Eligibility that  |
|            |     the borrower is entitled as an unremarried          |
|            |     surviving spouse.                                   |
|            |                                                         |
|            |     > Consult VA if the borrower's status is unclear    |
|            |     > after reviewing the appropriate documents, or if  |
|            |     > conflicting information is found.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Lo   | > Submit a copy of the documentation used to verify     |
| an Submiss | > exempt status with the closing package whenever no    |
| ions Invol | > funding fee is remitted.                              |
| ving Exemp |                                                         |
| t Borrower | > ***Exception***: The lender does **not** have to      |
| s {#loan-s | > submit the documentation if                           |
| ubmissions |                                                         |
| -involving | -   the borrower is an eligible surviving spouse, or    |
| -exempt-bo |                                                         |
| rrowers .u | -   the documentation had been previously provided to   |
| nnumbered} |     VA with the loan application as verification of the |
|            |     veteran's income.                                   |
+------------+---------------------------------------------------------+

Continued on next page

8.08 The VA Funding Fee, Continued

+------------+---------------------------------------------------------+
| #####      | > If the veteran's exempt status cannot be verified     |
| If Exempt  | > prior to loan closing, the funding fee **must** be    |
| Status Can | > remitted as if the borrower was **not** exempt.       |
| not be Det |                                                         |
| ermined {# | > Indicate in the closing package that the veteran      |
| if-exempt- | > claims exempt status. VA will determine the           |
| status-can | > borrower's status and refund the funding fee if       |
| not-be-det | > appropriate.                                          |
| ermined .u |                                                         |
| nnumbered} | > ***Reference***: Refer to the heading "Refunding      |
|            | > Overpayments to the Veteran" in this section.         |
|            |                                                         |
|            | > If the veteran has a pending disability compensation  |
|            | > claim at the time of loan closing, the funding fee    |
|            | > must be remitted as if the borrower was **not**       |
|            | > exempt.                                               |
|            |                                                         |
|            | > Advise the veteran to contact the VA regional office  |
|            | > to request a refund if it is later determined that    |
|            | > the veteran is entitled to compensation retroactively |
|            | > to a date prior to loan closing.                      |
|            |                                                         |
|            | > ***Reference***: Refer to the heading "Refunding      |
|            | > Overpayments to the Veteran" in this section.         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Ho   | > The lender must find the appropriate percentage in    |
| w to Use t | > the tables using the following parameters:            |
| he Funding |                                                         |
|  Fee Table | -   Is the veteran eligible for VA loan benefits        |
| s {#how-to |     through service in the regular military or the      |
| -use-the-f |     Reserves/National Guard? Examine the Certificate of |
| unding-fee |     Eligibility (COE). For Reserves/National Guard, the |
| -tables .u |     COE bears the notation, "RESERVES/NATIONAL GUARD -  |
| nnumbered} |     INCREASED FUNDING FEE," and is buff-colored rather  |
|            |     than green.                                         |
|            |                                                         |
|            | -   Is the veteran a subsequent user of VA home loan    |
|            |     benefits or obtaining his or her first VA loan?     |
|            |     Examine the COE. An entitlement code of "5"         |
|            |     indicates subsequent use, as does a loan number     |
|            |     entered in the "Loan Number" column.                |
+------------+---------------------------------------------------------+

Continued on next page

8.08 The VA Funding Fee, Continued

+------------+---------------------------------------------------------+
| ##### How  | -   What type of loan is the veteran obtaining? The     |
| to Use the |     funding fee varies depending upon whether the loan  |
|  Funding F |     is a purchase or construction loan, an IRRRL, or a  |
| ee Tables  |     cash-out refinancing loan.                          |
| (continued |                                                         |
| ) {#how-to | -   Is the veteran making a downpayment of at least 5   |
| -use-the-f |     or 10%?                                             |
| unding-fee |                                                         |
| -tables-co | ```{=html}                                              |
| ntinued .u | <!-- -->                                                |
| nnumbered} | ```                                                     |
|            | -   Calculate what percentage of the sales price of the |
|            |     property the veteran is remitting as a downpayment. |
|            |                                                         |
|            | -   The down payment may come from the veteran's own    |
|            |     resources or borrowed funds. **Except**, if the     |
|            |     purchase price exceeds the reasonable value of the  |
|            |     property, the difference between the purchase price |
|            |     and the reasonable value must be paid by the        |
|            |     veteran in cash without borrowing.                  |
|            |                                                         |
|            | -   For construction loans only, equity in the secured  |
|            |     property counts as a downpayment for calculating    |
|            |     the funding fee.                                    |
+------------+---------------------------------------------------------+

+------------+---+------------+----------------------+--------+----------+
| ##### Fu   | > |            |                      |        |          |
| nding Fee  |   |            |                      |        |          |
| Tables {#f | P |            |                      |        |          |
| unding-fee | u |            |                      |        |          |
| -tables .u | r |            |                      |        |          |
| nnumbered} | c |            |                      |        |          |
|            | h |            |                      |        |          |
|            | a |            |                      |        |          |
|            | s |            |                      |        |          |
|            | e |            |                      |        |          |
|            | > |            |                      |        |          |
|            |   |            |                      |        |          |
|            | A |            |                      |        |          |
|            | n |            |                      |        |          |
|            | d |            |                      |        |          |
|            | > |            |                      |        |          |
|            |   |            |                      |        |          |
|            | C |            |                      |        |          |
|            | o |            |                      |        |          |
|            | n |            |                      |        |          |
|            | s |            |                      |        |          |
|            | t |            |                      |        |          |
|            | r |            |                      |        |          |
|            | u |            |                      |        |          |
|            | c |            |                      |        |          |
|            | t |            |                      |        |          |
|            | i |            |                      |        |          |
|            | o |            |                      |        |          |
|            | n |            |                      |        |          |
|            | > |            |                      |        |          |
|            |   |            |                      |        |          |
|            | L |            |                      |        |          |
|            | o |            |                      |        |          |
|            | a |            |                      |        |          |
|            | n |            |                      |        |          |
|            | s |            |                      |        |          |
+------------+---+------------+----------------------+--------+----------+
|            |   | Type of    | Down Payment         | Perc   | Pe       |
|            |   | Veteran    |                      | entage | rcentage |
|            |   |            |                      | for    | for      |
|            |   |            |                      | First  | Su       |
|            |   |            |                      | Time   | bsequent |
|            |   |            |                      | Use    | Use      |
+------------+---+------------+----------------------+--------+----------+
|            |   | Regular    | None                 | 2.00%  | 3.00% \* |
|            |   | Military   |                      |        |          |
|            |   |            | 5% or more (up to    | 1.50%  | 1.50%    |
|            |   |            | 10%)                 |        |          |
|            |   |            |                      | 1.25%  | 1.25%    |
|            |   |            | 10% or more          |        |          |
+------------+---+------------+----------------------+--------+----------+
|            |   | Reserves/  | None                 | 2.75%  | 3.00% \* |
|            |   |            |                      |        |          |
|            |   | National   | 5% or more (up to    | 2.25%  | 2.25%    |
|            |   | Guard      | 10%)                 |        |          |
|            |   |            |                      | 2.00%  | 2.00%    |
|            |   |            | 10% or more          |        |          |
+------------+---+------------+----------------------+--------+----------+

+-----------------------------------------------------------------------+
| > Cash-Out Refinancing Loans                                          |
+-----------------------------------------------------------------------+

  -------------------------- ---------------------- ----------------------
  Type of Veteran            Percentage for First   Percentage for
                             Time Use               Subsequent Use

  Regular Military           2.00%                  3.00% \*

  Reserves/National Guard    2.75%                  3.00% \*
  -------------------------- ---------------------- ----------------------

+-----------------------------------------------------------------------+
| > \*The higher subsequent use fee does not apply to these types of    |
| > loans if the veteran's only prior use of entitlement was for a      |
| > manufactured home loan.                                             |
+-----------------------------------------------------------------------+

Continued on next page

8.08 The VA Funding Fee, Continued

+------------+---+-----------------------+--------------------------------+
| ##### Fund | > |                       |                                |
| ing Fee Ta |   |                       |                                |
| bles (cont | O |                       |                                |
| inued) {#f | t |                       |                                |
| unding-fee | h |                       |                                |
| -tables-co | e |                       |                                |
| ntinued .u | r |                       |                                |
| nnumbered} | > |                       |                                |
|            |   |                       |                                |
|            | T |                       |                                |
|            | y |                       |                                |
|            | p |                       |                                |
|            | e |                       |                                |
|            | s |                       |                                |
|            | > |                       |                                |
|            |   |                       |                                |
|            | O |                       |                                |
|            | f |                       |                                |
|            | > |                       |                                |
|            |   |                       |                                |
|            | L |                       |                                |
|            | o |                       |                                |
|            | a |                       |                                |
|            | n |                       |                                |
|            | s |                       |                                |
+------------+---+-----------------------+--------------------------------+
|            |   | Type of Loan          | Percentage for Either Type of  |
|            |   |                       | Veteran Whether First Time or  |
|            |   |                       | Subsequent Use                 |
+------------+---+-----------------------+--------------------------------+
|            |   | Interest Rate         | .50%                           |
|            |   | Reduction Refinancing |                                |
|            |   | Loans                 |                                |
+------------+---+-----------------------+--------------------------------+
|            |   | Manufactured Home     | 1.00%                          |
|            |   | Loans                 |                                |
+------------+---+-----------------------+--------------------------------+
|            |   | Loan Assumptions      | .50%                           |
+------------+---+-----------------------+--------------------------------+

+------------+---------------------------------------------------------+
| #####      | > For all loans except IRRRLs, apply the appropriate    |
| How to Cal | > percentage (from the funding fee tables) to the loan  |
| culate the | > amount.                                               |
|  Funding F |                                                         |
| ee {#how-t | > If the funding fee is to be paid from loan proceeds,  |
| o-calculat | > apply the percentage to the loan amount without the   |
| e-the-fund | > funding fee amount added to it.                       |
| ing-fee .u |                                                         |
| nnumbered} | > For IRRRLs, calculate the funding fee by completing   |
|            | > VA Form 26-8923, Interest Rate Reduction Refinancing  |
|            | > Loan Worksheet.                                       |
|            |                                                         |
|            | > ***Reference***: For joint loans, see "Calculation of |
|            | > the Funding Fee" in Section 7.01.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Ho   | > Lenders must remit the VA funding fee electronically  |
| w and When | > within 15 calendar days of loan closing. Appendix C   |
|  to Remit  | > explains the equipment needed and procedures used to  |
| the Fundin | > transmit the funding fee.                             |
| g Fee to V |                                                         |
| A {#how-an | > Appendix C also explains                              |
| d-when-to- |                                                         |
| remit-the- | -   funding fee receipts                                |
| funding-fe |                                                         |
| e-to-va .u | -   late fees and interest, and                         |
| nnumbered} |                                                         |
|            | -   how to obtain refunds.                              |
+------------+---------------------------------------------------------+

Continued on next page

8.08 The VA Funding Fee, Continued

+------------+---------------------------------------------------------+
| #####      | > A refund is appropriate if                            |
| Refunding  |                                                         |
| Overpaymen | -   an exempt veteran paid a funding fee, or            |
| ts to the  |                                                         |
| Veteran {# | -   a miscalculation of the fee caused an overpayment.  |
| refunding- |                                                         |
| overpaymen |     > All requests for refunds must be submitted to the |
| ts-to-the- |     > VA office where the loan was or will be           |
| veteran .u |     > submitted. Provide all pertinent facts, including |
| nnumbered} |     > the reason for the request and how the lender     |
|            |     > calculated the amount to be refunded.             |
|            |                                                         |
|            |     > If the veteran was overcharged, the following     |
|            |     > applies:                                          |
|            |                                                         |
|            | -   A veteran who paid cash for the funding fee         |
|            |     receives a cash refund for the amount of the        |
|            |     overpayment.                                        |
|            |                                                         |
|            | -   In the case of a veteran who paid the funding fee   |
|            |     out of loan proceeds, the lender must apply the     |
|            |     overpayment against the loan balance.               |
|            |                                                         |
|            | -   Submit evidence to VA that the refund was applied   |
|            |     against the principal balance of the loan.          |
+------------+---------------------------------------------------------+

"Cash-out" Refinancing Loans, 8-14

1% Flat Fee, 8-13

4% Limit, 8-12

Attorney's Fees, 8-8

Borrower Fees and Charges, 8-1

Brokerage Fees, 8-8

Calculating the Funding Fee, 8-20

Construction Loans, 8-7

Exempt Status Cannot be Determined, 8-18

Fees and Charges If the Loan Never Closes, 8-13

Fees and Charges That Can be Included In the Loan Amount, 8-14

Fees and Charges the Veteran-Borrower Can Pay, 8-3

Fees and Charges the Veteran-Borrower Cannot Pay, 8-8

Funding Fee Exception, 8-16

Funding Fee Tables, 8-19

HUD/FHA Inspection Fees, 8-9

Interest Rate Reduction Refinancing Loan (IRRRL), 8-14

Itemized Fees and Charges, 8-3

Lender's 1% Flat Charge, 8-6

Lender's Use of 1% Flat Charge, 8-8

limitations on borrower-paid fees, 8-2

Loan Submissions Involving Exempt Borrowers, 8-17

Other Parties Fees and Charges, 8-10

Other Refinancing Loans, 8-15

Prepayment Penalties, 8-9

Refunding Overpayments to the Veteran, 8-21

Remitting the Funding Fee to VA, 8-20

Seller Concessions, 8-11

Using the Funding Fee Tables, 8-18

VA Funding Fee, 8-1, 8-16

VA Policy on Fees and Charges, 8-2

Verify Exempt Status, 8-17