The VA allows seller concessions. But, these concessions cannot exceed 4% of the appraised value of the property, that is, the VA loan amount with zero down payment. For instance, concessions on a $250,000 home cannot exceed $10,000 ($250,000 purchase amount x 4% limit).
Accordingly, can the seller pay off debt on a VA loan?
When purchasing a home, the VA loan buyer can ask the seller to contribute up to 4% of the purchase price in seller credit. This seller credit CAN be used to pay off existing debt. This can allow the borrower to pay off higher interest debt as well as enable the borrower to qualify for a higher amount.
Herein, does a VA loan require the seller to pay closing costs?
One of the big benefits of VA loans is that sellers can pay all of your loan-related closing costs. Again, they’re not required to pay any of them, so this will always be a product of negotiation between buyer and seller.
How can I avoid closing costs with a VA loan?
Now, you know there are closing costs on VA loans, but what if you don’t want to or cannot bring those costs to closing? The most common way to overcome bringing these funds to closing is by seller paid closing costs and VA sales concessions. Remember, the seller is NOT required to pay the buyer’s closing costs.
The seller may contribute up to 4% of the sale price, plus reasonable and customary loan costs on VA home loans.
And the idea that sellers have to pay closing costs for VA buyers is simply untrue. In short, there’s no reason a seller should reject your purchase offer simply because you’re using a VA loan.
Using a VA loan means you’ll end up saving money both on the purchase and over the life of the loan. However, it does mean the person selling you the house will have to spend more to sell you the house. If you’re worried about the seller denying your offer because you’re using a VA loan, don’t be.
Note: We require that a seller can’t pay more than 4% of the total home loan in seller’s concessions. But this rule only covers some closing costs, including the VA funding fee. The rule doesn’t cover loan discount points.
Closing costs are paid according to the terms of the purchase contract made between the buyer and seller. Usually the buyer pays for most of the closing costs, but there are instances when the seller may have to pay some fees at closing too.
It is typically between $300 and $900. The is a non-allowable cost. Some lenders waive it on VA loans, but many will charge it to the seller. The other fee is from the title company and will be called an escrow, settlement or closing fee.
VA loans come with red tape, appraisal delays and fees borne by sellers instead of buyers — all reasons offers are being rejected, agents say. In addition, real estate agents and veterans say, some sellers reject offers because of misconceptions about the VA program.