Key Takeaways
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VA non-allowable fees are specific closing costs that Veterans are not permitted to pay, ensuring cost protections.
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The VA 1% rule limits lender origination and processing fees to 1% of the loan amount, preventing excessive charges.
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Non-allowable fees must be covered by the lender, seller, or real estate agent—not the Veteran.
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Termite inspections can now be paid by Veterans when required, following the VA’s 2022 guideline update.
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If you’re a Veteran or active-duty service member planning to purchase a home in 2025, understanding VA non-allowable fees, the VA 1% rule, and VA loan closing costs is crucial. These built-in protections help prevent overcharging during the homebuying process, making homeownership more accessible and affordable. In this article, we’ll break down what these fees are, how they work, and what you need to know to avoid unnecessary charges.
What Are VA Non-Allowable Fees?
VA non-allowable fees are specific closing costs that Veterans are not permitted to pay under the VA loan program. These restrictions are designed to protect borrowers from excessive or duplicate charges.
Common non-allowable fees include loan application or processing fees, rate lock fees, document preparation fees, postage or courier fees, escrow or notary fees, lender-ordered appraisals or inspections (except for construction loans), attorney fees charged by the lender, tax service fees, and settlement fees. The lender must waive these fees, or another party—such as the seller or real estate agent—must cover them.
The 1% Rule Explained
To keep closing costs in check, the VA enforces what’s known as the “1 percent rule.” This rule limits the amount a lender can charge a VA borrower for origination and processing fees. A lender may charge up to 1% of the loan amount to cover overhead costs. If the lender charges this flat fee, they cannot add on individual non-allowable fees separately. For example, on a $300,000 VA loan, the maximum chargeable lender fee is $3,000. If non-allowable fees exceed this limit, the lender absorbs the cost or the seller pays it.
VA Allowable vs. Non-Allowable Fees (2025 Overview)
This table compares the fees Veterans may pay at closing with those they cannot:
| Allowable Fees | Non-Allowable Fees |
| VA funding fee | Loan application fees |
| VA appraisal | Attorney fees |
| Credit report fee | Rate lock fees |
| Origination fee (max 1%) | Escrow or notary fees |
| Title insurance | Postage/courier fees |
| Recording fees | Tax service fees |
| Discount points | Document prep fees |
Who Pays for VA Non-Allowable Fees?
If a fee falls under the non-allowable category, the Veteran does not pay it. Instead, the seller can cover it through concessions (up to 4% of the purchase price), the real estate agent can step in, or the lender may choose to waive or absorb the cost. Negotiating who pays for non-allowable fees should be part of your purchase agreement strategy.
Can VA Borrowers Pay for Termite Inspections?
Yes, as of June 2022, the VA updated its guidelines and now allows Veterans to pay for termite inspections when required. Before the change, most considered this a non-allowable fee unless specific exemptions applied.
How to Lower VA Loan Closing Costs
Even allowable fees can add up. Here are a few ways to reduce what you pay at the closing table:
- Negotiate with the lender: Ask whether the lender can reduce or waive any fees. Lenders may be willing to adjust origination fees or discount points.
- Use seller concessions: VA loans allow sellers to cover all loan-related closing costs plus up to 4% in additional concessions. This can include non-allowable fees, prepaids, and more.
- Roll costs into the loan: You can finance certain costs, like the VA funding fee, into the total loan amount. This reduces upfront expenses but may increase long-term interest costs.
- Check for VA funding fee exemptions: Veterans receiving VA disability compensation and surviving spouses of certain service members are exempt from the VA funding fee—saving thousands at closing.
FAQs About Non-Allowable VA Fees
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