VA loan seller closing costs

[Rachael Collins]

Hello all- I have received an offer on my house and the buyer is using a VA loan. One of the contingencies is that I agree to pay up to 3.5% in closing costs and prepaid items. That is aprox. $8k in this case, which seems outrageous. Is this normal for VA loans?

[Christian Bors]

@Rachael Collins That is pretty standard. VA loans can request up to 4% in seller assistance. The greatest advantage of a VA loan (from a buyer's perspective) is the low down payment. Veterans can do a VA loan w/ zero percent down and request up to 4% closing costs. Depending on the price range of the home, this means the buyer could possible get a check made payable to them at closing!

Similar to a VA loan, the FHA loan will allow up to 6% in seller assistance. However, a whopping 3.5% down payment is required. Chances are if you are selling a property and the buyer submits an offer using a VA or FHA financing, its more than likely they will be requesting some seller assistance. These products are great for people that can only afford a small down payment. Hence, they typically will try to bring as little cash as possible.

One last thing about these loans. They can be very painful if you are the seller. Both of these loans have their own "appraisal inspection." You can bet if you are selling an older home, the inspection will yield repairs that will need to be fixed before closing. Typical items that appear on the VA/FHA inspection are chipping paint, steps that do not have a hand rails and GFI outlets.

Good luck,

CB