| 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.
Non-Allowable
Fees
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 of you.
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 lender's
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 seller's
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 buyer's closing costs."
copyright
2006 by Terry Light and RealEstate ABC
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