The VA regulates who may pay for what and how much each party may pay. There are 3 rules that govern who can pay what Arizona VA home loan closing costs.
- The 4% Rule
- Unlimited Non-Recurring Closing Costs Rule
- VA Non-Allowable Costs
1. The 4% Costs Rule
A VA borrower may receive up to 4% of the appraised value of the home they are buying in seller-paid closing costs. The 4% total does NOT include non-recurring closing costs or bonafide discount points.
Costs included in the 4% limit
- Seller payment of the VA Funding Fee
- Seller’s pre-payment of property taxes and insurance
- Payment of extra points to provide a permanent interest rate buy-down
- Seller paying off credit balances or judgments on behalf of the VA borrower
- Gifts from the seller such as a television set or a microwave
Example of the 4% calculation:
$300,000(appraised value) x 4%(max concession limit) = $12,000 total allowed under 4% Rule
2. Non-Recurring Closing Costs
In addition to the 4% rule, a VA borrower may also have a seller pay for 100% of fees categorized as Non-Recurring Closing Costs.
Non-Recurring Closing Costs
- Title Work
- Recording fees
- Credit report
- Discount points
- Other lender fees
3. VA Non-Allowable Fees
VA has designated specific fees a VA borrower cannot pay as “Non-Allowable” The seller, the buyer’s agent and/or the buyer’s lender may pay for these fees.
Check out our informative page on VA Non-Allowable Fees
The HOUSE Team is your Arizona VA mortgage expert. Contact us today with your VA home loan questions.
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Team Phone: 602.435.2149
Team Email: Team@JeremyHouse.com