VA Seller Concessions

How VA Assumable Loans and Seller Concessions Work Together

VA assumable loans and VA seller concessions are separate rules, but they often show up in the same negotiation. Understanding how they fit together can help both buyers and sellers structure a deal that actually closes.

Assumable VA loans: what is really being "assumed"

• The buyer steps into the seller's existing VA loan, including the current interest rate, remaining balance, and remaining term.
• The buyer must qualify with the lender or loan servicer on income, assets, and credit, just as they would for a new loan.
• Both veterans and non‑veterans can assume a VA loan if they meet the guidelines. The key difference is how the veteran's VA entitlement is handled after the assumption.

When a non‑veteran buyer assumes a VA loan and the seller's entitlement is not formally released, part of the seller's benefit can remain tied up in that property. That can reduce the amount of VA entitlement they have available for a future purchase, or require extra cash down later. It is important for a selling veteran to confirm, in writing, whether the assumption will restore their entitlement.

Where VA seller concessions come in

VA seller concessions are extra financial help a seller can give the buyer on top of any standard closing costs they agree to pay. The Department of Veterans Affairs limits these concessions to no more than 4% of the home's reasonable value or loan amount, depending on how the lender applies the rule. The 4% cap applies to nonstandard incentives, such as:

• Paying the buyer's VA funding fee
• Paying off the buyer's debts to help them qualify
• Prepaying taxes and insurance
• Providing a temporary interest rate buydown
• Covering certain closing gifts or add‑ons that are not part of the property itself

Standard closing costs that are normal and customary for the area are handled separately. The seller can still agree to pay some or all of those costs without those amounts counting toward the 4% concession cap, subject to VA and lender rules.

Combining assumptions and concessions

When a buyer is assuming a VA loan, seller concessions can help bridge remaining costs so the buyer can close. For example, a seller might:

• Let the buyer assume a low‑rate VA loan balance
• Agree to pay the buyer's VA funding fee or other allowable concessions up to the 4% cap
• Cover some standard closing costs so the buyer brings less cash to the table

What does not change is the VA 4% cap on concessions. Even in an assumption, the seller cannot provide unlimited financial incentives, and the property still needs to appraise for the value needed to support the agreed price and concessions.

Practical Strategies to Use VA Seller Concessions Wisely

Strong deals with VA financing usually come from clear planning rather than pushing every limit available. The goal is to use seller concessions to solve real problems, not to inflate the price.

For buyers using or assuming a VA loan

• Target concessions where they move the needle most. If cash at closing is a challenge, request concessions that directly cut your upfront costs, such as a funding fee credit, prepaid taxes and insurance, or a short‑term interest rate buydown.
• Keep the appraisal in mind. If you ask the seller to raise the price to "cover" large concessions, the property still needs to appraise. If it does not, you may have to renegotiate or bring extra cash.
• Clarify what counts toward the 4% cap. Work with your loan officer to separate ordinary closing costs from true VA seller concessions so you do not accidentally exceed the allowed limit.
• In assumptions, confirm the details in writing. Make sure the assumption agreement specifies which costs the seller is paying, how concessions are structured, and how the veteran's entitlement will be handled after closing.

For sellers offering VA concessions

• Use concessions to widen your buyer pool. Offering targeted help with closing costs or a small interest rate buydown can make your property more attractive to VA buyers without cutting the list price.
• Stay within the 4% ceiling. Monitor the combined value of all nonstandard incentives so they stay within VA limits and do not create underwriting issues late in the process.
• Protect your net proceeds. Run the numbers with your agent or advisor so you understand how concessions, price, and potential repairs interact. Sometimes a modest price adjustment is more effective than high concessions, or vice‑versa.
• If you are the veteran, think about your next move. Before approving an assumption with concessions, confirm how much of your entitlement will be restored and how that affects your ability to buy again using VA financing.

Used thoughtfully, VA seller concessions can make a VA‑financed or VA‑assumable transaction smoother for everyone at the table. The key is to stay within the rules, document everything clearly, and focus on solving the buyer's real financial obstacles instead of simply "maxing out" what the guidelines allow.