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VA Loan Seller Concessions

When purchasing a home, it's important to consider more than just the property's price. Other expenses can add up quickly and impact your overall affordability.

During the negotiation process, buyers using a VA loan may request that sellers provide additional concessions (or payment) to assist with some of the expected costs related to the homebuying process.

What are Seller Concessions?

Seller concessions, also known as seller contributions or seller assistance, are closing costs the seller agrees to pay to help the buyer reduce the upfront expenses of buying a home.

This means the seller covers VA loan costs that are usually the buyer's responsibility. Seller concessions can be a great way for homebuyers to save money when purchasing a property.

While seller concessions with a VA loan will vary depending on the home and buyer, some examples include:

  • Payment of the buyer's VA funding fee
  • Origination fee: the cost of underwriting and processing your loan
  • Appraisal fee
  • Prepayment of the buyer’s property taxes or homeowners insurance
  • Title insurance
  • Attorney fees
  • Discount points
  • Gifts such as a television set or microwave oven
  • Payoff of credit balances or judgments on behalf of the buyer

VA Seller Concession Rule

If you’re purchasing a home with a VA loan, the VA mandates that the total value of seller concessions must not exceed 4% of the "established reasonable value” of the property. However, this doesn’t count typical closing costs, so buyers can ask sellers to cover any loan-related costs at closing as well.

The 4% rule keeps the seller from offering so many concessions that a buyer is tempted to take out a VA home loan amount they can't really afford. In comparison, conventional loans typically set a 3% cap on seller concessions.

What are the Maximum Seller Concessions Allowed for a VA Loan?

The VA caps seller concessions at 4% of the home’s established reasonable value, which is typically determined during the VA loan appraisal process. If the home you are purchasing appraises for $400,000, then seller concessions are capped at $16,000.