Change Date

September 15, 2004, Change 4

·  This section has been changed to create subsection lettering.

·  Subsection a has been changed to reference “section” instead of “topic.”

a. Lender’s Use of 1% Flat Charge

The lender’s maximum allowable flat charge of 1% of the loan amount (or greater percentage in the case of construction loans) is intended to cover all of the lender’s costs and services which are not reimbursable as “itemized fees and charges.”  The lender may pay third parties for services or do as it wishes with the funds from the flat charge, as long as the lender complies with the Real Estate Settlement Procedures Act (RESPA). 

Section 2, subsections c and d of this chapter provide some examples of items that cannot be charged to the veteran as “itemized fees and charges.”

This section  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.

b. Attorney’s Fees

The lender may not charge the borrower for attorney’s fees.  Reasonable fees for title examination work and title insurance can be paid, however, by the borrower.  They are allowable itemized fees and charges.

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.