Asking the Seller to Pay Your VA Loan Closing Costs

Marcus Marion, CMA™ 1 month ago 0 5

When you buy a home using a VA loan, you have the opportunity to avoid making a down payment. That’s one of the unique features of this program. It allows military members and veterans to finance the full purchase price.

But VA loan home buyers still encounter closing costs in most cases, and these can add up to thousands of dollars.

Home buyers have different ways to cover these costs. You can pay them out-of-pocket from your own savings, use gift money from a family member, or ask the seller to pay your VA loan closing costs.

This article explores the third scenario, where a home buyer using a VA loan asks the seller to pay their closing costs.

What Are the Closing Costs for a VA Loan?

Within the context of a VA home loan, “closing costs” refers to the various fees you will pay to finalize the loan and complete the purchase of the home. Closing costs can include mortgage origination fees, title insurance, escrow company fee, government recording fees, and more.

As for the amount, the closing costs for a VA-guaranteed mortgage loan typically range from 2% to 5% of the home purchase price. And that can add up to thousands of dollars.

As a home buyer, the best thing you can do is to prepare ahead of time. The sooner you start saving up for your closing costs, the better.

Asking the Seller to Pay Your Closing Costs

You don’t necessarily have to pay all of your VA loan closing costs out-of-pocket. There are a couple of other strategies to consider as well. And one of them is to ask the seller to pay your VA loan closing costs, as part of the deal.

The Department of Veterans Affairs allows sellers to contribute money toward the home buyer’s closing costs on a VA loan, up to a certain limit. In the real estate world, this is commonly referred to as a “seller concession” or “seller assist.” The seller is conceding, or giving, something to the buyer to help facilitate the sale of their home.

There are other types of seller concessions as well. These include things like price reductions, mortgage rate buydowns, home furnishings, and more. But in this case, we will limit our discussion to scenarios where the seller offers to pay some of the buyer’s VA loan closing costs.

Now that you know this is possible, you might be tempted to rush out and ask sellers to pay all of your closing costs. Less burden for you, right?

But there are some important things to consider before making such a request.

In certain scenarios, a seller might offer to pay a certain percentage of the buyer’s closing costs. They might even mention this within the property listing, and on the for-sale sign out in the yard.

More commonly, the seller won’t even mention closing costs when promoting their home. So in this case, the buyer has to come right out and ask the seller to make such a contribution. This requires forethought and planning.

How Real Estate Market Conditions Play into This

Before you ask for such a seller concession or contribution, you have to consider the current conditions within your local housing market. Which way does the market currently lean? Is it more of a buyer’s market, a seller’s market, or somewhere in between?

Local real estate conditions can either increase or decrease your chance for success, when asking the seller to pay your VA loan closing costs.

Consider the difference between these two scenarios:

Scenario #1: In a highly active real estate market that tends to favor sellers, the seller will probably receive multiple offers from competing buyers. This gives them the luxury to dismiss offers they feel have too many “strings attached.” Asking for a closing cost contribution in this scenario might cause the home to slip through your fingers.

Scenario #2: In a slower real estate scene, where homes tend to stay on the market for much longer, sellers are often more willing to negotiate with buyers and might agree to a closing cost contribution. In this case, asking the seller to pay your VA loan closing costs might actually work out in your favor, by putting some money back into your pocket.

In both cases, home buyers should understand current real estate market conditions and dynamics in their area, before requesting a closing cost contribution.

Adding a Clause to the Contract

If you discuss this with your real estate agent and decide it’s a good time to ask for such a concession, the process itself is fairly straightforward. The buyer’s real estate agent will simply add a clause to the offer / purchase agreement that requests a specific contribution from the seller.

But this is entirely negotiable. The seller can agree to making a concession, or reject the offer outright.

Sometimes, the buyer’s agent and listing agent will have a preliminary discussion about this, before adding it to the contract. If the listing agent communicates that the homeowner is unwilling to offer any money toward closing costs, there’s probably no need to make a formal request.

On the other hand, if the homeowner shows willingness to pay a certain amount in closing costs, the buyer’s agent can add a relevant clause to the contract. Like everything in the real estate world, you have to “get it in writing.”

Here are the most important points to take away from this:

  • You can ask the seller to pay some of your costs when using a VA loan.
  • The Department of Veterans Affairs allows these seller contributions.
  • But the homeowner has to be willing to do this; they’re not required to.
  • Much of this will depend on housing market conditions in your area.
  • Talk it over with your real estate agent to see if it makes sense.
Leave a Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

– Advertisement – BuzzMag Ad