VA Financing- How to buy a home with no down payment and less than $100 in closing costs!

VA loans are unique in that they can be used to buy a home with very little or no cash from the borrower.  Seller-paid closing costs and concessions help make low- and no-cost closing possible for veterans. It’s important to understand the difference between closing costs and concessions.

The following allowable closing costs, if paid by the seller, are not defined as 'seller paid concessions' and do not count against the VA approved seller-paid concession limitation (which is 4% of the sales price):

• Lender’s 1% flat fee or origination fee
• VA appraisal
• Land Survey
• Credit report
• Title work
• Recording fee
• Appraisal
• Credit report
• Discount points
• Other fees authorized by the VA

The seller can pay any or all of the VA borrower's allowable closing costs at his or her discretion as per the purchase agreement.  The VA limits charges “made against or paid by” the borrower.  However, there are no limits for payment of fees and charges by other parties.

To search for a hew home, here are over 20,000 homes to choose from in Oregon!

As a SEPARATE and additional credit available to the VA buyer, we have what are described as 'Seller Concessions'.  These concessions are paid or provided by the seller and are limited to 4% of the sales price on VA financed sales.

Seller concessions often take the form of gifts. A typical gift example would be the seller including an appliance or a television in the sale of the home. Concessions may also include the seller paying the VA funding fee (which the VA loan applicant is normally required to pay) or paying points on the loan to lower the interest rate.

VA seller concessions may even include paying insurance or property taxes for the buyer and putting money in escrow to give the buyer a temporarily reduced interest rate buydown.


That limit on seller concessions (4% of the sales price) requires the seller to keep track of the value of the concessions offered, but some things the buyer can do for the seller don’t count as a concession—unless they exceed certain limits. For example--as described above, under VA rules, paying the buyer’s normal and customary closing costs is not considered a concession. Even discount points on the borrowers loan that are typical for VA loans in the local market .. are NOT considered seller concessions. (Points reduce the interest rate and payment on the loan- one point is eqaul to 1% of the loan amount).  

But if the buyer pays points above and beyond what’s typical for the market, payment of the additional points IS considered a seller’s concession.

Additionally a seller can pay up to 4% concessions which can help entice the buyer.  Concessions which count toward the seller’s allotted 4% include:

• VA funding fee
• Prepayment of property taxes and escrowed insurances
• Gifts/incentives such as appliance packages, upgraded materials, spas, etc
• Escrowed fund for permanent or temporary interest rate buydowns
• Payoffs for credit balances, judgments, collections etc.

The VA Funding Fee is often the largest of these allowable seller-paid concessions.  The fee for a first-time VA loan benefits user with less that 5% down payment is 2.15% of the total loan amount. If the funding fee is not paid by the seller, it is one of the fees that the veteran is allowed to roll into the loan.  Rolling in loan costs and fees can add to your principal balance and interest is charged for life of the loan. 

For additional information about costs involved in VA loans, contact an experienced loan specialist.