Tuesday, June 19, 2012

How Much Seller Assistance Is Available With VA Financing

By Ann Johnson

When you sell a house to a buyer who is using VA financing, you must abide by the Veterans Affairs' guidelines regarding what fees you pay and how much you can financially assist the buyer. During the negotiation process, the buyer may request you pay certain fees. The VA guidelines limit what the buyer can ask for, and while you are not obligated to pay the requested fees, the buyer might make his offer contingent on your additional assistance.

The Department of Veterans Affairs does not finance VA loans -- it guarantees them. This enables a qualified borrower to obtain a home loan with little or no down payment. In a conventional loan, the lender typically requires the borrower to put down 20 percent of the purchase price. If the borrower puts down less than 20 percent, she normally purchases private mortgage insurance to cover lender losses should she default on the loan. Instead of buying private mortgage insurance, the VA provides similar insurance at no cost to the borrower.

A lender must be approved by Veterans Affairs in order to fund VA-insured loans. While the VA sets the guidelines, the lender is the one who decides if the borrower qualifies for the loan, and how much he can borrow. A VA borrower has to pass a credit check, just like other borrowers. The lender also sets the interest rates, closing costs and any discount points.

While the seller can pay some of the buyer’s closing costs, the total amount the seller can pay in closing costs cannot exceed 4 percent of the purchase price. This includes costs for VA funding fee, prepaid closing costs, funds for temporary buydowns and payoff of credit balances or judgments for the veteran. Not subject to this 4 percent is the payment of discount points.

There are some fees the buyer is not allowed to pay, and are normally paid by the seller or lender. The buyer cannot pay for the termite report, unless the loan is a refinance. The VA borrower can only pay for appraisals, credit reports, origination fees, title fees, recording fees, discount points and survey if needed -- nothing else.

Those eligible for a VA loan include veterans, active duty personnel, select reservists and National Guard members, surviving spouses of service members who died in active duty or as a result of service and spouses of active duty personnel who are missing in action or detained forcibly by a foreign power or captured while serving.


http://www.lenderva.com

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