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 2000 by Terry
Light and RealEstate ABC |
