There are a number of reasons why a borrower may have a VA loan canceled.
Sometimes the borrower simply has a change of heart about the loan or the property to be purchased with that loan. Other times a family emergency or other situation could required that major financial commitments be put on hold.
In other cases, the VA loan cancellation may not be the borrower?s idea at all; the seller could change his or her mind about the deal, a lender may decide cancel the loan before it has closed if the borrower?s job status changes suddenly or there is a major change in the borrower?s ability to pay the mortgage.
Regardless of the reasons why the loan might be canceled, the borrower naturally wants to know what happens to the fees and expenses paid. Does the VA loan applicant get a refund to all expenses?
Here?s what VA Pamphlet 26-7 says on the subject:
?What happens to Fees and Charges If the Loan Never Closes?
a. Itemized Fees and Charges
The borrower?s out-of-pocket expenses for itemized fees and charges already incurred, such as the appraisal and credit report, do not get refunded.
b. The One Percent Flat Fee
If the lender has already collected the one percent flat fee from the borrower, the lender must refund the fee. This applies to a loan that does not close for any reason, including the borrower going to another lender.?
That last line is an important one. Borrowers have the right to change lenders if they choose. A borrower who finds another willing lender who offers more competitive terms and conditions may well decide to go with the new bank instead?in such cases the lender may not penalize the VA loan applicant by withholding the one percent flat fee.
The ?no refunds? rule on expenses such as appraisals and credit reports is due to the fact that these fees are for services rendered. Those services must be paid for regardless of what else happens with the loan. If a service was given, it must be paid for.
Do you have questions about VA home loans? Ask us in the comments section.
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