Home Buying in 02035>Question Details

Bdcaruba, Home Buyer in 02035

I'm using V.A. loan and seller wants 3 1/2% at Purchase and Sale. Typical? What's the sense of a no money down loan? Being taken

Asked by Bdcaruba, 02035 Fri Apr 29, 2011

advantage of?

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I take it by your question that the seller wants to to make a "good faith deposit" of 3.5% of the purchase price when you sign the Purchase and Sale Agreement. Typically, homeowners want you to put something down as "good faith" that you'll complete the transaction. In return, they take their home off the market and no longer offer it for sale. If for some reason you fail to properly complete the transaction (i.e., failed to apply for a mortgage, etc.) and withdraw, the sellers will keep your deposit.

If you do go through with the purchase, then the 3.5% deposit that you made will be applied towards whatever down payment and/or closing costs you may have.

In this case, you are applying for a VA loan. I presume that you are seeking 100% financing. In addition, I further presume the VA funding fee will be rolled into the mortgage. That leaves closing costs. What happens is the 3.5% down payment will be applied towards your closing costs. If your closing costs amount to less than the 3.5% down payment, then what is not spent will be returned to you at the settlement table. If the seller is paying your closing costs (or a portion of it), then the seller's proceeds will first be applied to your closing costs before you make any contributions. Again, whatever funds remain from the initial 3.5% deposit you made will be returned to you at settlement.

Hope this helps.
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0 votes Thank Flag Link Fri Apr 29, 2011
I am missing something. The seller is asking for 3.5%? What , as a kickback or what? Are they asking that you put down 3.5% as earnest money? The no money down is an option the VA offers because the VA guarantees its loan and thus allows a lender to offer the no money down since the VA has guaranteed the loan should it have to go to foreclosure. Sellers asking for a percentage at the sale is not normal. I trust you are using a real estate agent to work for you and your interests, if not get one - it costs you nothing.
0 votes Thank Flag Link Fri Apr 29, 2011
Typically you can recover the amount you had to put down for a deposit in the loan, so you can get that money back at closing or put it towards closing costs and points. If not having the monies available for the deposit - Did anyone explain to the Seller that you are using a 100% loan program and that you probably don't have the 3.5%?? In my area where we havea Navy base and many Coast Guard personnel, Sellers know that $1,000 or so is typically what we will get from a VA buyer for a deposit.
0 votes Thank Flag Link Fri Apr 29, 2011
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