Seller Concessions on VA Home Loans Can Be Used to Pay Off Debt

Mortgage and Lending with Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. NMLS257576

VA loans offer a truly unique, deal-saving option that few understand! While you may know that VA has a seller concession limit of 4% of the sales price, you might not know WHAT is included in that 4%.

Sellers can pay up to 4% in sales concessions to include:Colorado Home Lender

Buyer's funding fee

Prepaid taxes and insurance

Gifts such as television, microwave, etc

Interest rate buy down points

Temporary buy down funds

Payoff of credit balances or judgments on behalf of the buyer (Yep! That's right!)

Payment of closing costs and normal discount points (that aren't for the purpose of buying down the interest rate) are NOT included in the 4% limitation.


Sales price of $200,000. Seller can pay 4%, or $8,000 on behalf of the borrower. PLUS standard closing costs. The tricky thing is prepaids are counted against the 4% limit, but closing costs are in addition to the 4% limit!

So lets say, for the purpose of this example only, upfront and prepaids for taxes, insurance and escrow accounts = $2,000

Buyer has a car loan with a balance of $6,000, that the seller is willing to pay off. That would max out the 4% seller concession limitation. BUT the seller could still pay all closing costs. So, if your closing costs are $3,000, a seller could pay $11,000. Thus the veteran gets in with no out of pocket and no more monthly payments for the car loan.

Keep in mind, though, the value MUST support the Sales Price, so artificially increasing the price of a home just to pay concessions is not going to work!

Posted by

Ruth Vogt, Reverse Loans in Colorado

Ruth Vogt
NMLS #257576
Reverse "Retirement" Mortgage Lender

Educating 62+ homeowners on how to leverage home equity allowing them to live more comfortably in their retirement years.

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Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.


Comments (2)

Stacie Streets
Fairway Independent Mortgage Company - Colorado Springs, CO
Mortgage Ninja!!

Ruth Vogt This information has saved many deals for me. I wish FHA would get on board with this concept, life woudl be so much easier!!!

Jun 28, 2017 11:45 AM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO

Stacie Streets That would be interesting, wouldn't it?

Jun 28, 2017 02:13 PM