Category: VA Funding Fee

Benefits and Drawbacks of Kentucky VA Mortgage Loans

Kentucky VA Mortgage  Loans


Kentucky VA Mortgage  Loans

Why VA Loans?
First and foremost, VA loans put homeownership within reach of a wider population.
That’s because, while they’re issued and administered through a wide range of lending institutions, all VA mortgages are federally guaranteed.
Lenders consider them lower risk than other loans. That means that people with average or even below-average credit scores are more likely to be approved for a VA loan than a traditional loan.
If you have a high debt-to-income ratio or you’ve fallen behind on your credit card payments in the past, you may be eligible for a VA loan, even if you’ve been turned down for a private mortgage in the past.
What’s more, vets and active-duty soldiers can often purchase a loan with no down payment.
Military wages aren’t the most generous. In 2020, new service members earned as little as $19,000 per year, while the median salary in the US is nearly $50,000 per year.
Particularly for people who are just starting out in their military careers, it can be tough to amass enough savings to match the down payment requirements associated with traditional loans.
If you take out a private loan and put down less than 20% of your home purchase price, you’ll be required to pay for Private Mortgage Insurance (PMI) until you’ve established 20% equity in your home. That can add $100 or more to your monthly homeownership expenses.
The government stipulates that VA loan borrowers don’t have to take out PMI.
Finally, VA loan interest rates typically track below market averages. Again, that’s because lenders consider them less risky.
What can that mean in savings for you?
Here’s just one example. A 0.5% interest rate reduction on a $200,000 30-year mortgage can save you more than $19,000 in lifetime loan costs.
And that’s before you factor in PMI payments. The more you borrow, the more you benefit from a low interest rate.
The median purchase price of a US home in 2021 is over $400,000. So chances are, you could wind up saving more with a VA loan.

Kentucky VA Mortgage with Seller Concessions for Closing Costs and Paying Off Debts Guideline


The max seller paid closings costs on a Kentucky VA loans is 4% and with the concessions that can include payoffs of credit balances: 

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VA Mortgage Seller Concessions Rule

The Department of Veterans Affairs defines a Seller Concession as “…anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide.“

The seller’s paying of the buyer’s closing costs is not considered a Seller Concession.  A Seller Concession is considered anything paid to the buyer outside of the normal closing costs that is offered to make the sale more attractive to a buyer.  These concessions often come in the form of the seller paying such pre-paid items as the Homeowners Insurance premium or the amount needed for property tax escrows.

Another common concession is the seller agreeing to pay the VA Funding Fee on behalf of the veteran or paying the lender discount points to buy down the interest rate on the Veteran’s new VA mortgage.  VA Funding Fees are typically financed by the Veteran, so when the seller agrees to pay this cost, this fee does not need to be financed, resulting in lower loan amount and lower payment for the Veteran.  By paying discount points to buy down the Veteran’s interest rate, the result can be savings in the thousands over the life of the loan.

These Seller Concessions can even include such items as appliances, TVs, furniture, lawn mowers, etc.   If such items are used they need to be listed with a reasonable value assigned to each.

One of the more interesting Seller Concessions allows for the seller to payoff a borrower’s liability, such as a collection, a judgement or a credit balance.  Sometimes there is a particular account on a credit report that is preventing a potential home buyer from qualifying for a mortgage.  Paying off this account can be offered as a Seller Concession and make the difference between the buyer qualifying and not qualifying for a VA mortgage.

Seller Concessions often include the following…

  • paying the pre-paid items such as insurance premiums and tax escrows
  • paying the VA Funding Fee
  • offering such gifts as TVs, appliances, furniture and other houshold items which are not typically included
  • paying off a borrower liabilty such as a collection, judgement or credit balance

Is there a limit to the amount of Concessions a Seller can offer?

The Department of Veteran Affairs has capped the amount of Seller Concessions to 4% of the sales price. 

Why is their a 4% cap on Seller’s Concessions?

The intent with the cap is to offer protection to the Veteran against overly aggressive Seller Concessions which may tempt Veterans into attempting the purchase a home that may really stretch their budget beyond true affordability.

Wait a minute… you mentioned some items like appliances, TV and furniture can be offered as Seller Concessions, how do we know how much these are worth to make sure their value is within this 4% cap?

For sellers to properly offer such concessions they must provide the buyer and lender with an itemized list of the concessions to be offered.  The list needs to make sense and be reasonable.  Claiming a 46″ LCD TV is worth $5000 would certainly raise an eyebrow.  The list is subject to approval by the VA so make sure these types of concessions are reasonable and fall within the 4% cap.

So just to confirm……If a seller pays any of the buyer’s closing costs it is not considered a Seller’s Concession?

That is correct.  The seller can pay all of the buyer’s closing costs without limit and these closing costs are not included in the Sellers Concession 4% cap. If there are closing costs that are considered excessive or are not typical for the area, they can be then included in as a Seller Concession.   Since the VA also allows the seller to pay these costs without limit, the result is that the Veteran can often come to the closing table with no money needed.

Thank you,

VA Updated Funding Fee Information


VA Updated Funding Fee Information – WebLGY Release
VA has announced that release 21.10, which was previously scheduled for release on 7/20/2021, has been postponed to 7/27/2021.

As previously announced, VA has issued a Circular providing additional details regarding the enhancement made to the COE and WebLGY providing more certainty regarding whether to collect the funding fee. A funding fee must not be collected from individuals who are by statue provided a waiver of the funding fee. Lenders are to ensure before loan closing, whether a borrower is exempt from having to pay a funding fee. The statutory waiver of funding fees applies to the following:

  • A veteran receiving disability 
  • A surviving spouse
  • A veteran who is eligible to receive compensation as a result of pre-discharge disability 
  • Purple Heart Member of the armed forces 

A COE is not necessary for IRRRLS. The enhancement to VA’s systems provides for more accurate funding fee exception information under the appraisal case initiated screen. Lenders can print this verification at any time throughout the loan origination process. This enhancement will expedite the loan origination process for IRRRL borrowers.Refer to VA Release 21.10 and Circular 26-21-11 for more details.