VA loans offer many benefits to eligible borrowers, although the most popular is the opportunity for obtaining a no down payment loan . However, a unique advantage often overlooked is in regard to closing costs. The VA protects the veteran by limiting the types of closing costs that the borrower may pay. In addition, the VA allows the seller to pay for all or part of the buyer’s closing costs. When understanding the truth about VA loan seller paid closing costs, you will see why this mortgage program is probably the best in the industry.
Typically, there are a number of fees associated with a mortgage, even a VA loan. The VA allows a borrower to be charged for the appraisal, credit report, title insurance, origination fee, recording fee and survey. However, there are other fees that are normally charged that the VA borrower cannot pay, such as attorney fees, underwriting and processing fees, tax service fees, document fees, escrow fees, termite inspection fees, etc. This is how the VA protects the borrower from paying unnecessary and excessive closing costs. With a VA loan, these fees are usually paid by the seller.
Can the seller pay all of the closing costs?
The VA does allow the seller to pay the closing costs for a VA loan. In fact, there is no set maximum cap as to how much of the closing costs a seller can pay. Yes, the truth is, if the transaction is done correctly, the seller can actually pay all of the closing costs for the buyer.
In order to get the best benefit of seller paid closing costs, it is important that the borrower contact their lender prior to signing the real estate sales contract. This is so vital because it can be difficult to include seller paid closing costs in the VA home purchase sales contract after an offer has been made by the borrower and accepted by the seller. When these negotiations are made prior to signing the contract, it is very possible to have the seller pay all of the buyers closing costs which will result in no out of pocket expenses for the borrower. This is a true 100% financing VA loan.
Seller paid closing costs should not be confused with seller concessions. Seller concessions are in addition to seller paid closing costs and are anything of value added to the transaction. The amount of seller concessions is capped at 4% of the sales price. It is a separate benefit that is offered with VA loans.
In order to get the most for your money when purchasing a home, it is important to choose a knowledgeable lender who is very familiar with VA loans. Remember, while the lender sets the mortgage rate (which can be very competitive) and lender fees (Veteran Home Financing does not charge lender fees), the lender is also needed to get the most seller paid closing costs as part of your sales contract.
VA loans are offered by approved lenders who can provide additional information. There is no need to visit a VA lender for more information since nationwide VA lenders are available online. Feel free at any time to contact us for more information about VA loans or for a free no obligation quote.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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