There seems to be a lot of confusion with Seller Concessions and Seller Assistance with VA mortgages, mainly due to the FHA guidelines which is another government loan. However, these 2 loan programs are very different and heres why.
4% VA Seller Concession
VA Mortgages has a limit of 4% of the Appraised Value that the seller can contribute to a buyer on a VA
purchase without it being considered excessive.
For VA purposes, a seller concession is defined as anything of value added to the transaction which the buyer pays no additional amount and which the seller is not customarily expected to pay.
Some examples of concessions include seller payment of the following:
• buyer’s funding fee
• buyer’s prepaids (Taxes and Insurance)
• gifts, such as television, appliances
• temporary buydown fees
• buyer's debts
Buyer's Debts
Buyer's debts can be included to be paid by the seller if the Seller wishes but counts towards the 4% cap. Keep in mind that in a buyers market where the seller's agree to pay for all closing costs & pre-paids, your pre-paids can eat your concession up to 2% out of the 4% cap. Be sure to calculate that into your estimate.
Buyer's debts are NOT ADDED to the loan. No relvoving debts (i.e Credit cards)
Seller Closing Cost Assistance
The seller can agree to pay for all the following in FULL and there is NO CAP on how much they can pay off below:
• Non Re-curring closing costs
• Discount Points
The difference between VA & FHA
Unlike FHA loans where the closing costs & pre-paids are capped at 6%....
VA loans have no cap on the seller paying for closing costs (Lender Fees & Settlement Fees) but does have a 4% cap for pre-paids(Taxes & Insurance)
I hope this clears up any confusion out there!
______________________________________________________
Thanks for checking out my blog! Feel free to leave a comment or subscribe, much appreciated!
Just-In-Time Loans - Mortgage Needs and Advice on Time. (757) 692-3464
;)
;)
Good one dude! So many people just don't realize the latitude you can have regarding seller paid expenses with VA (and USDA, but that would need to be another post). Especially regarding discount points, in this rate environment, there is much you can do to help a buyer qualify.
Sure beats the days when contract submitted by my VA approved buyers were being rejected because the seller could hand pick from competing offers and "VA just makes the seller pay too much of the costs".
It's nice to see the tables turn!
Gerry Suarez, Jr.
Your FHA Loan Pro!