Seller Concessions for VA Loans
Many borrowers encounter seller concessions at some point in the homebuying journey. Seller concessions are a valuable tool that can benefit both buyers and sellers in a VA loan transaction. Understanding seller concessions can help you navigate the VA loan process with confidence and maximize your VA benefits.
What are VA Loan Seller Concessions?
Seller concessions are certain costs or expenses that a seller agrees to pay in the homebuying process. These concessions relieve the buyer and often make it easier for them to buy the property from the seller. Seller concessions can help offset closing costs, repairs or other expenses associated with buying a home.
How Do Seller Concessions Work With VA Loans?
When buying a home with a VA loan, sellers can offer concessions to help the buyer cover closing costs or other expenses that may arise during the homebuying process.
Common seller concessions include:
- Origination fee
- Appraisal fee
- Attorney fees
- Payment of the buyer’s funding fee
- Prepayment of the buyer’s property taxes and insurance
- Gifts such as appliances or electronics
- Payment of extra points to provide permanent interest rate buydowns
- Provision of escrowed funds to provide temporary interest rate buydowns
- Payoff of credit balances or judgments on behalf of the buyer
Buyers can work with their real estate agent, loan officer and the seller to negotiate seller concessions. This can occur after the initial home inspection or during the final homebuying negotiations.
VA Loan Seller Concession Limitations and Maximum Amount
When applying for a VA loan, it's important to keep in mind that any concession or combination of concessions totaling more than four percent of the loan amount is considered excessive by the VA and will not be approved.
For example, if the sale price of the home is $300,000, the maximum amount in seller concessions a buyer could ask for is $12,000.
Benefits of Seller Concessions With VA Loans
Seller concessions can be an excellent benefit for VA loan borrowers. VA homebuyers can buy their properties for less and reduce their overall spending.
Seller concessions may also reduce the amount of cash the buyer needs in order to close on the property. Typically, the best time for seller concessions is when demand for properties is low and sellers are eager to sell their property. Not only do seller concessions benefit the buyer by reducing their out-of-pocket cost, but they also speed up the homebuying process and help sellers get their homes off the market in a timely manner.
