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VA Loan Seller Concessions

During the negotiation process, homebuyers using a VA loan may ask the seller to offer additional concessions (or payments) to help cover some expected costs related to purchasing the home.

What are seller concessions?

Seller concessions are anything of value added to the purchase of a home or property for which the buyer pays no additional fees and the seller is not required to pay.

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

  • Payment of the buyer's VA funding fee
  • Prepayment of the buyer's property taxes and insurance
  • Gifts such as a television set or microwave oven
  • Payment of extra points to provide permanent interest rate buydowns
  • Provision of escrowed funds to provide temporary interest rate buydowns
  • 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.