Tips for purchasing a home with FHA or VA financing

Tips for purchasing with FHA or VA Financing.

If you are planning on purchasing a home soon and will be using a VA or FHA loan in order to finance your purchase, you must include that information in your offer since government loans place additional financial and performance obligations on the seller know as Non-Allowable Fees

Non Allowable Fees
For starters, FHA and VA loans prohibit buyers from paying certain fees that are often charged by lenders, escrow companies, settlement agents, and title companies. They are known as "non-allowable" fees. These fees still get charged, but as the buyer of the property, you are "not allowed" to pay them. The result is that the seller will have to end up paying them instead of you.

Most of these "non-allowable" fees come from your lender. By the time you are ready to make an offer you should have already been pre-qualified by a loan officer, so you will want to ask how much the lender’s non-allowable fees will be. You might also want to get an idea of what non-allowable fees will be charged by the escrow company 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 not be as willing to go down on their price. If not, you as the buyer could also offer over asking price and ask the seller to credit that overage towards those fees.

VA and FHA Appraisals

Home appraisals and inspections on FHA and VA loans are stricter than on conventional loans and generally more expensive. These appraisers are required to perform a certain minimum number of inspections as well as evaluate the current market value of the property. These inspections are generally not as detailed as a professional home inspection and should not be considered a substitute, but sometimes they require repairs which you might want to negotiate with the seller.

If there is significant repair work required, 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."


What have you noticed about FHA offers?

To your success,

Oliver Graf
Real Estate Expert


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