This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!
Question: Are funding fees on VA loans eligible for seller credits?
Answer: Loans guaranteed by the Department of Veterans Affairs are known as VA Loans and provide current and former service members with an opportunity to purchase a home with as little as 0% down.
In addition to the normal closing costs (title fees, transfer taxes, etc.), a funding fee is charged at settlement, which is equal to anywhere from 1.25-3.3% of the loan amount, depending on size of down payment, type of service and whether or not it’s the borrower’s first time using the VA loan program.
It’s a fee paid to the VA on every loan to offset the cost of loans that default (similar to mortgage insurance on non-VA loans). Disabled veterans are eligible to have the entire fee waived.
In a previous column, I explained how buyers can negotiate for seller credits to reduce or eliminate the out-of-pocket expense of closing costs at settlement. Fortunately, the funding fee falls into this category, along with the rest of the standard closing costs associated with a VA loan, and buyers are eligible to have all of these costs covered by the seller.
In theory, if a buyer is able to negotiate 100% of closing costs paid by the seller and chooses a 0% down payment loan, a home can be purchased cash-free.
If you’re unable to negotiate seller credits to cover the funding fee and are concerned about having the cash to pay for closing costs, you’re also allowed to roll the funding fee into your mortgage so that it becomes part of your monthly payment.
Some Other Facts about VA Loans You May Not Know
- Financing is available up to $1,500,000, just not at 0% down
- You can use your VA entitlement more than once
- VA loans are assumable (can transfer from seller to buyer at seller’s rates) which is a big deal in today’s market because rates have been increasing steadily
- Adjustable Rate Mortgages (ARM’s) are also available, not just fixed-rate
Arlington Veterans Affairs (VA) Loans by the Numbers
- In 2017, 261 of 3,130 buyers (8.3%) used a VA loan. By comparison, 2,173 used a Conventional loan (69.4%)
- The average purchase price for homes purchased using a VA loan was just over $615,751
- 38% of VA loans were used to purchase a condo, 29% to purchase a townhouse and 33% to purchase a single-family home
- On average, buyers using a VA loan negotiated 2.3% off the original asking price. By comparison, buyers using a conventional loan negotiated 2.2% off the original asking price and cash buyers negotiated 4% off the original asking price
I hope the veterans and active duty military readers had a great Veterans Day Weekend. Thank you for your service!
If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.
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Join the NAACP Arlington Branch, HOME of Virginia, and Equal Rights Center for the 2nd Annual Arlington Fair Housing Conference on April 15th to discuss the threats and opportunities to advancing fair housing policy across the state and within Arlington.
The half-day, in-person event will feature speakers from fair housing advocacy organizations and government agencies including the U.S. Department of Housing and Urban Development, and focus on fair housing policy trends in Virginia and Arlington County. The conference aims to advance the understanding of issues and policies related to equity and affirmatively further fair housing among local officials, advocates, and members of the public.
2nd Annual Arlington Fair Housing Conference
Is home ownership a goal of yours in 2023? Now is the time to make it happen! Grab a (virtual) drink with the area’s top Real Estate experts, learn all about the home buying process and on how you can get $1,500 towards your closing costs immediately!
Did you know the average Arlington renter will spend $150K in 5 years of renting? Stop paying down someone else’s mortgage! Join us for a Rent vs. Buy Happy Hour on Wednesday, April 5th at 6 p.m. via Zoom. If this time doesn’t work, we also are offering times convenient for your schedule!
A lot has happened in the local market since the beginning of the pandemic. Sip on your drink of choice and learn from Northern Virginia, Arlington and Washingtonian Magazines top producing agents! We will discuss the latest market updates, the home buying process and rent vs. buy cost savings. Please RSVP by clicking here.
Call/text Manavi at 703-869-6698 with any questions!
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