Max VA Concessions

Most VA loan Certificates of Eligibility (COEs) are misunderstood, which leads Veterans to think they can’t buy when they actually can. If your COE says $0 entitlement, you still could have the ability to get a VA loan with 0% down.

One of the most misunderstood rules for VA loans is seller concessions, what they can be used for, and how the max seller concession is calculated.

While VA loans offer 0% down payments, there are still costs associated with buying a home that range from around 3-5% of your loan amount. 

Someone has to pay for these closing costs, and if you don’t want it to be you, that’s where a seller’s credit can help. This is when the seller uses their proceeds from the sale of a home to reduce fees that otherwise would be paid by the buyer. The amount of credit you receive from the sellers is something that is negotiated in the terms of your contract to buy the home.

For a VA loan, many lenders and realtors believe that the maximum amount that can be covered by the seller is 4% of the home’s value. This is not true! If your lender or real estate agent believes this, it may be a sign that you are working with someone who does not understand VA loans.

In the VA handbook, it clearly states that a seller can pay for up to 4% of the sales price, on top of covering all customary closing costs.

The extra 4% in seller concessions can be used for

• Payment of the VA Funding Fee
• Payment of extra points for an interest rate buydown
• Payment of escrow reserves for a temporary interest rate buydown
• Prepayment of taxes, insurance, mortgage interest, or HOA dues
• Pay off debt on your credit report 
• Gifts such as a television set or a microwave

This is separate from your customary closing costs, which can include

• Transfer taxes
• A lender’s processing and underwriting fee
• Payment of points appropriate to the market 
• Appraisal fee
• Credit report
• Title insurance 
• Attorney/Settlement fees