How Government- FHA-VA- Loans will affect your offer|
How FHA and VA Loans Affect Your Offer
If you are obtaining a VA or FHA loan in order to finance your
purchase, you must include that information in your offer. This is
because government loans place additional financial and performance
obligations on the seller.
First, VA and FHA loans prohibit buyers from paying certain types of
fees that are often charged by lenders, escrow companies, settlement
agents, and title companies. They are called "non-allowable" fees.
They still get charged anyway, but as the buyer, you are "not allowed"
to pay them. The result is that the seller ends up paying them instead
Most of these "non-allowable" fees come from your lender. By the time
you are making an offer you should have already been pre-qualified by
a loan officer, so you or your real estate agent can ask how much the
lenderís non-allowable fees will be. Experienced agents should also
have an idea of what non-allowable fees will be charged by the escrow
or settlement agent and the title insurance company.
Since these are fees the seller would not pay on an offer with
conventional financing, this information must be included in your offer.
You should also realize that since the seller will be paying these
additional fees, they may be a little less negotiable on the price.
VA and FHA Appraisals
Home appraisal inspections on FHA and VA loans are a little more
detailed than on conventional loans (and more expensive). The
appraisers are required to perform certain minimum inspections as well
as evaluate the market value of the property. Although these
inspections are not as detailed as a professional home inspection and
should not be considered a substitute, sometimes repairs are required.
These are additional costs the seller would not be obligated to pay for
someone obtaining conventional financing, so your offer should include
a maximum figure for these repairs. Otherwise the seller is signing the
equivalent of a blank check, and they do not want to do that.
At the same time, whatever figure you put in will most likely affect the
sellerís willingness to negotiate on price. If you put $500 as an
estimate, the seller may be $500 less negotiable on their price. If no
repairs are required, you may have been able to get the house for $500
less than what you and the seller agreed on as the price. The solution
is to add a clause to your offer that goes something like this. "If
required repairs cost less than the maximum amount allowed, the
excess will be credited toward buyerís closing costs."
copyright 2000 by Terry Light and RealEstate ABC