Tag Archives: VA loans

Seller Contributions and Non-Allowed Lender Fees

Questions?  Call Maxine for answers! 703-836-1464

Questions? Call Maxine for answers! 703-836-1464

Did you know that FHA and VA loans both contain fees that a borrower cannot, by law,
pay?

Yep.  It is a fact.  In order to facilitate settlements you will find in most of our DC Metro Area contracts contain clauses in the VA and FHA Finance Addenda that state that the “sellers agree to pay any fees that the borrower cannot, by law, pay.”

If you have a contract with seller contributions, the fees the borrower cannot pay are first deducted by that same concession (i.e. If you have $500 in fees the buyer cannot pay and have
$1000 in seller contribution then the $1000 first pays the $500 for the buyer
and the remaining $500 is provided to offset other closing costs.)
Remember no closing costs assistance can EVER go towards a borrower’s down
payment.

But what if you have $0 seller contribution?  Again, as
most of our local contracts read, the seller will still be responsible for
paying those fees that the buyer cannot pay.  For Presidential Mortgage
Services, Prudential PenFed Realty’s affiliated lender, this amounts to $760 on a VA loan and
$85.00 on an FHA loan.  For other lenders it could be significantly more.

Please be aware that if you are a listing agent and you agree to an FHA or VA
contract that $0 seller contribution, does not necessarily mean $0 from your
seller.