2016 VA Guidelines On Sellers Concessions

What Are The 2016 VA Guidelines On Sellers Concessions

VA Loans is hands down the best mortgage loan program available today for owner occupant home buyers. Unfortunately, not everyone can qualify for a VA Loan. Only Veterans with a Certificate of Eligibility can qualify for a VA Loan. One of the greatest benefits our country offers its veterans who has been honorable discharged and served our great country is the opportunity to qualify for a VA home loan. VA Loans do not require any money down and most veterans can purchase a home with no money out of pocket. There are two types of costs involved when buying a home. The down payment and closing costs on a home puchase .  VA does not require any down payment from the home buyer and the closing costs can be covered by the home seller through  sellers concessions . The way sellers concessions work is when a home seller will offer to pay all closing costs associated by the home buyer and the home buyer does not have to come up with any money out of pocket. Is this for free? Nothing in this world is for free. The way it works and to best explain it is to use a case scenario example:

2016 VA Guidelines On Sellers Concessions

Say a home seller want $100,000 net in his pocket for his home. There is a Veteran with a solid pre-approval letter with a VA Loan and the home seller is interested in selling the home to the veteran, however, the veteran has no money for the closing cost on his VA home purchase. The home seller is allowed to offer up to 4% of the home purchase price as a sellers concession to the veteran so the veteran can cover all of his or her closing costs. On this case scenario, the veteran can offer 4% of the $100,000 or up to a maximum of $4,000 to the home buyer so the home buyer can cover his or her closing costs. Example of closing costs are pre-paids which are two months property taxes and homeowners insurance for the borrower’s escrows, title charges, one year homeowners insurance that the home buyer needs to pay upfront at closing, appraisal fees, inspection fees, attorney’s fees, recording charges for the city, county, state, and any other third party or origination charges. On this case scenario, since the home seller wants a bottom line price of $100,000, the home seller and home buyer will structure the real estate purchase contract at $104,000 where the $4,000 will go to the home buyer towards their closing costs. The sellers concession is stated on the real estate purchase contract for the home appraiser and the mortgage lender to see and is fully disclosed.

2016 VA Guidelines On Sellers Concessions: Sellers Concessions Overage

Many VA home buyers do not want to pay any closing costs so they want to make sure that they have enough closing cost credit through a home sellers concession and not want to be short. The Department of Veteran Affairs allows up to a maximum of 4% for a home seller to give a home buyer sellers concessions towards their home purchase. However, any overages on a sellers concession cannot go back to the home buyer in a form of cash or other incentives. Overages In Sellers Concessions needs to go back to the home seller. It is almost impossible to know the exact figure for the closing costs a home buyer will incur at the time of the purchase contract so most of the time, closing costs are estimated. If a home buyer has any overages in sellers concessions, then the overage can be used to buy down the mortgage rates so the home buyer does not waste any sellers concessions.

2016 VA Guidelines On Sellers Concessions: About VA Loans

VA Loans is the best mortgage loan program for any home buyer. Again, VA Loans are limited for Veterans who have a valid Certificate of Eligibility certificate and in good standing. VA Loans do not require for the home buyer to put any money down and closing costs can be covered with either a sellers concession by the home seller or by a lender credit towards the home buyer’s closing costs. How lender credit works is that the mortgage lender will cover the home buyer’s closing costs in lieu of charging a higher mortgage interest rates. There are times where a home seller will not offer a sellers concession and the home buyer will not have any funds to pay for their closing costs on their home purchase. The mortgage lender then can see how much of a lender credit they can offer the veteran for their home purchase so they can still purchase the home where all of the closing costs will be covered by the mortgage lender and no money needs to come out of the home buyer’s pocket.

VA Loans offer extremely low mortgage rates. With Conventional Loans, the higher your down payment is, the lower your mortgage rates is. The reason why Conventional mortgage lenders offer lower mortgage rates for a home buyer who puts a larger down payment is because the home buyer is putting skin in the game and the more equity the home has and lower loan to value a property has, the lower the lender’s risk tolerance level is. The reason why VA mortgage lenders offer extremely low mortgage rates on VA Loans even though the veteran puts zero dollars down is because the VA Loan is insured with the Department of Veterans Affairs in the event if the Veteran defaults on his or her VA Loan.

If you are a Veteran and are interested in a VA Loan, please contact me at 262-716-8151 or email me at gcho@gustancho.com. I am available 7 days a week, evenings, weekends, and holidays to take your calls and answer any questions you may have on getting qualified for a VA Loan.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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