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VA Mortgage 4% Seller Concession & Closing Cost Assistance Clarification

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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!


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Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

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!

Apr 09, 2009 01:12 AM
Military Relocation Specialists
Long and Foster Realtors - Virginia Beach, VA

Hot tip of the day!!  That was great for clarity... I did think that the VA 4% cap included the closing costs and discount points-- oops!  As always, I am smarter for having visited your blog today.   Thanks Justin!  This would be good for the next office meeting too!

Apr 09, 2009 10:03 AM
Justin Williams
Independent - Virginia Beach, VA
Loan Officer

@Gerry - Thanks for the positive response, Yeah I just figured in this market VA loans are becoming more popular and I still see a lot of mistakes being made on contracts.  I had one guy try to roll the debt into the loan!  Thanks for the dropping by!

@MRS - Your Welcome and thats a great idea ;-)

Apr 09, 2009 01:14 PM
Kathy Torline
ERA Herman Group Real Estate - Colorado Springs, CO
Colorado Springs Real Estate Blog 719-287-1049

GREAT article, you just taught me something this morning.

Apr 10, 2009 01:28 AM
Mesa, Arizona Real Estate Mesa Arizona Realtor
Homes Arizona Real Estate LLC - Mesa, AZ

Justin, good explanation of VA and how it works. We had an offer recently on a listing, and it was VA. The buyer asked for more than the seller would go for....and reduced his offer as well. Thanks for sharing...;-)

Apr 10, 2009 09:53 AM
Keane Ng
Cross Country Mortgage - Renton, WA
Yes, so many people think the 4% is for closing costs and pre-paids.
Nov 28, 2009 07:53 AM
Bruce Reichstein
www.OneTimeClose.com - Houston, TX
FHA / VA One-Time Close Loans - Nationwide

I am always happy to see more RE articles running comparisons between FHA and VA programs...the alphabet soup of programs available is more confusing by the day :-)

Apr 08, 2010 01:25 AM
Lester Muranaka
360 Mortgage Group, LLC - NMLS 155922 - Austin, TX
360 Mortgage Group, LLC - NMLS # 155922

Well done Justin! The benefits of the VA Loan and especially when it comes to possibly refinancing are tremendous. It's unfortunate when eligible veterans don't take advantage of their home loan benefits.

Jun 24, 2011 06:11 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Many agents are totally confused concerning these two costs !!!!!!!!!

Aug 25, 2014 11:15 PM