Understanding Seller Concessions for VA Loans

You found the perfect home and you’re planning to finance it with an attractive VA loan. But there’s more good news—the current homeowner can actually help you pay for some of the associated fees with Seller Concessions.

Yep, you heard that right. In addition to all the fantastic benefits associated with a mortgage backed by the U.S. Department of Veterans Affairs, you can save money on closing costs or receive home-related items to offset your home-buying expenses.
Seller concessions for VA financing cannot exceed 4% and may include the following:1
  • Prepaying taxes and insurance on the home.
  • Paying your VA funding fee.
  • Paying off judgements or credit balances on your behalf.
  • Gifts you may need, such as a microwave or dishwasher.
The seller can also help you save money by paying “points” to reduce the interest rate on your mortgage for a specified period of time. Also called a buydown, this assistance is not subject to the 4% cap on seller concessions.
When combined with the other benefits of a VA loan (lower interest rates, flexible requirements, no down payment, etc.2), seller concessions can help you march toward to your new home faster than you ever expected.3 

1 Under our rules, a seller's "concessions" can't exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are: payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the Veteran, and funds for temporary "buydowns." Payment of discount points is not subject to the 4% limit.
2 Qualified veteran homebuyers to purchase a primary residence with no down payment, up to the conforming loan limit, which varies by location. For loans greater this limit, up to $2,000,000 can be financed with an approved VA loan with a down payment. Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply. Other conditions and requirements apply. Ask your Stearns Lending Mortgage Loan Officer (MLO) for details. 
3 Seller concessions may also be available for Conventional and FHA (Federal Housing Authority) loans.

- By Stephanie Clark , Nov 15, 2018