Orange County VA loan borrowers need to understand the difference between Seller Concessions and a Seller Credit for Closing Costs. Most loan programs will allow for the seller to pay some or of buyers closing costs, but VA goes a step further. VA allows for Seller Concessions.
What is a Seller Concession?
According to the VA, a Seller Concession is anything of value added to a transaction by the seller or builder for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide. Below are several examples of Seller Concessions.
- Payment of the buyer’s VA Funding Fee – this can be large for Orange County VA home buyers
- Prepayment of the buyer’s property taxes and insurance. These are items included in “prepaid” expenses.
- Gifts such as a television set or microwave.
- Payment of extra points to provide permanent buydown of the interest rate. For example, if it is customary to pay 1 Origination and 1 Discount for a 5% rate, but the seller pay 2 additional Discount points to buy the rate down to 4.5%, that would be a Seller Concession.
- Provision of escrowed funds to provide temporary interest rate buydowns – like a 2-1 Buydown program.
- Payoff of credit balances or judgements on behalf of the buyer.
Seller concessions do not include:
- Payment of the buyer’s non-recurring closing costs
- Payment of points which are typical for the market
Imagine that. If an Orange County Veteran wants to purchase a home but first needs to pay off credit card debt, he or she could negotiate to have the seller pay off the debt as part of the purchase.
There cannot be more than 4% in Seller Concessions. But remember, you will not need to include normal discount points or buyer’s closing costs as part of the 4% limit.
Talking With an Orange County VA Loan Expert is the First Step
The first step is always to talk with a local Orange County VA loan officer. Your VA loan officer should be able to answer most questions, prepare detailed loan scenarios, and walk you through the VA loan PreApproval process.
Authored by Tim Storm, an Orange County, CA VA Loan Officer MLO 223456– Please contact my office at Emery Financial Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com