The two Government Loans we will discuss in this blog is the FHA and VA loans. The FHA loan is Government Insured and the VA loan is Government Guaranteed. Government loans will typically have more conditions to be met than conventional loans, but the one condition that makes these loans so common today is the down payment requirement. VA loans require zero down payment while the FHA loan requires 3 ½ % down as compared to the conventional loan which would require anywhere from 5 % to 20% down.
As the Seller of a home where the buyer is seeking a Government loan, it is important to understand what closing costs will be involved with the transaction. Although it is very common in the market today for sellers to agree to pay for the buyers closing costs, the seller must pay some of the buyer costs. These costs are called non-allowable costs. Non-allowable costs are those costs that the government will not allow the buyer to pay. Either the seller will have to pay such costs or the lender will have to pay these costs. If the lender agrees to pay the costs, it will most likely cause the interest rate to go up to offset the perceived loss to the lender. As the seller of the property, make sure your agent explains what the non-allowable costs will are and the purpose for the costs. It will affect you bottom line (Net Return).
Government loans also require addendums to the contract, such as the FHA addendum. This addendum must be signed by the buyer and the seller, which simply states that the property must appraise for the purchase price or more or the financing will not be approved. This is a common contingency in the contract already, but this addendum must be included with the contract when submitted to underwriting. If you are using the VA loan, the Government will require a Certificate of Reasonable Value (CRV), which is the Governments equivalent of an appraisal. If the CRV is less than the sales price, the buyer must pay the difference of the two amounts out of pocket. The Government will not loan more than the CRV amount. If monies are paid out of pocket, it cannot be borrowed or given to the borrower. The money must be in the buyers bank account and it must be seasoned for at least sixty days.
Andy Aun with Aun and McKay Law Firm will be conducting a seminar to educate real estate agents, as well as buyers and sellers, on the requirements of Government financing. There are many issues that must be considered at the time a contract is ratified in order to avoid default by either party to the contract. This seminar is FREE to all and will include food and drinks. Please see the flyer with all the information you need for this seminar at the bottom of this blog. This seminar will be Thursday, Feb 23rd in Lexington, SC. Hope to see you there!
When discussing finance or re-finance with a loan officer, you will do well by including Erica West, with New American Mortgage, as one of those you speak to. Erica West is an expert in financing as well as down payment assistance programs. Erica may be able to get the down payment you need at no cost to you. Give Erica West a call at (803) 528-5019.
If you are considering a Real Estate License to start a new career or even to make some money part time in Real Estate, we would love to help you become a Successful Real Estate Agent at the Real Estate School for Success. We have classes for any type of license you would be interested in to include, a SC Real Estate License, SC Appraisers License, SC Property Managers License or SC Home Inspectors License. You can also receive a 15% discount on any class by entering the promo code below when you register on line at the Real Estate School for Success.
Discount/Promo Code is: government
flyer.bmp (2.47 mb) Flyer for Aun and McKay seminar on Government Loans.
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