What is the maximum seller concessions allowed on VA loans?

What is the maximum seller concessions allowed on VA loans?

• A. 4%
• B. 6%
• C. 2%
• D. 0%

Answer: (A)

The rule being tested is how much seller help is allowed on VA loans. The maximum seller concessions are 4% of the lesser of the sales price or the appraised value. This cap ensures concessions stay in line with the home's value and the loan's risk. So, the seller can cover closing costs, prepaid items, and certain other allowable costs, but the total cannot exceed 4% of whichever amount is smaller between the agreed price and what the appraiser determined the home is worth. For example, if the sale price is $300,000 but the appraisal is $290,000, the cap would be 4% of $290,000. If the appraisal is $310,000, the cap would be 4% of $300,000. Concessions cannot be used to provide cash back to the borrower or to fund an unnecessary down payment.

The rule being tested is how much seller help is allowed on VA loans. The maximum seller concessions are 4% of the lesser of the sales price or the appraised value. This cap ensures concessions stay in line with the home's value and the loan's risk.

So, the seller can cover closing costs, prepaid items, and certain other allowable costs, but the total cannot exceed 4% of whichever amount is smaller between the agreed price and what the appraiser determined the home is worth. For example, if the sale price is $300,000 but the appraisal is $290,000, the cap would be 4% of $290,000. If the appraisal is $310,000, the cap would be 4% of $300,000. Concessions cannot be used to provide cash back to the borrower or to fund an unnecessary down payment.