How Does a VA Home Loan Affect the Seller? | Mortgage Solutions Financial (2024)

FAQs

How does a VA loan affect the seller? ›

VA Loan Requirements For Sellers

VA guidelines allow sellers to pay up to 4% of selling price in concessions. VA loans have a Funding Fee that buyers typically pay but could fall on the seller with negotiation.

At times, sellers might shy away from VA loans, worried about the appraisal process. They fear VA appraisals are far stricter than conventional loans, potentially undervaluing their home or demanding costly repairs before closing.

VA loans have had a higher average closing success rate than conventional loans over the last five years. The other piece is that sellers are not required to pay any costs on behalf of a VA buyer.

Sellers have the right to choose the type of financing they prefer, as long as they do not engage in discriminatory practices.

Contrary to what many believe, a VA loan offer is not bad for sellers. Not having to make a down payment means a VA loan homebuyer may have extra funds to cover closing costs and appraisal differences if the appraisal comes in lower than the sale price.

The seller can agree to pay a portion of the buyer's closing costs, up to 4 percent of the mortgage, including the funding fee or origination fee. For a VA loan, sellers are always required to pay the real estate agent commissions, brokerage fees and termite reports.

Under the PACT Act, all toxic exposed Veterans were supposed to become eligible for VA care – in increments – between now and 2032. VA eliminated the phased-in approach – meaning that three new cohorts of Veterans are now eligible to enroll in VA health care as of March 5, 2024.

It depends on the situation. Most sellers won't acknowledge an offer that's 10% less than the market value. It's insulting to them, and they don't want to deal with the back and forth of a counteroffer. Some sellers may even be offended by the lowball offer like you are trying to take advantage of them.

Sellers often prefer conventional buyers because of their own financial views. Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.

Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property.

What does a VA loan require the seller to pay? ›

Note: We require that a seller can't pay more than 4% of the total home loan in seller's concessions. But this rule covers only some closing costs, including the VA funding fee. The rule doesn't cover loan discount points.

If you want to sell your house with a VA loan, there is no required amount of time that you have to wait. You are welcome to sell your house whenever you want, but it is generally a good idea to make sure you can make enough money from the sale to pay off the remaining balance of your mortgage.

Getting It Back

When you arrive at the closing your earnest money will be credited back to you and applied to your down payment or closing costs.

Common Reasons VA Loans are Denied

Poor credit. Significant changes in credit. Income outside the qualification range. High debt-to-income ratio.

If you've received an other than honorable, bad conduct, or dishonorable discharge, you may not be eligible for VA benefits.

Note: We require that a seller can't pay more than 4% of the total home loan in seller's concessions. But this rule covers only some closing costs, including the VA funding fee.

The seller, lender, or any other party may pay fees and charges, including discount points, on behalf of the borrower. VA regulations limit charges “made against or paid by” the borrower. They do not limit the payment of fees and charges by other parties.

If you want to sell your house with a VA loan, there is no required amount of time that you have to wait. You are welcome to sell your house whenever you want, but it is generally a good idea to make sure you can make enough money from the sale to pay off the remaining balance of your mortgage.

Do sellers prefer conventional over VA loans? VA loans can take longer to close than a conventional loan because the underwriting process is longer. Some sellers may not be willing to wait the extra time it takes for a VA loan to close.