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A step-by-step guide from understanding your benefit to closing day.
Earnest money is a deposit showing good faith when making an offer. VA buyers can absolutely pay earnest money — and in competitive markets, doing so can strengthen your offer. The deposit is typically held by a title company or real estate broker and applied toward your closing costs or down payment at closing.
If the deal falls through because the VA appraised value is below the contract price, the VA escape clause allows you to recover your earnest money. Make sure your purchase contract clearly outlines the conditions for refund.
Seller concessions are contributions the seller makes toward your closing costs, prepaids, or points. For VA loans, the maximum seller concession is 4% of the VA reasonable value of the property. This is separate from the seller paying for normal closing costs or repairs required by the VA appraisal.
Seller concessions can be a powerful tool to reduce your out-of-pocket expenses at closing. However, they must be negotiated as part of the purchase contract and disclosed on the Closing Disclosure. Normal seller-paid closing costs — such as title insurance, transfer taxes, or recording fees — do not count toward the 4% concession limit.
If the VA reasonable value is $400,000, the maximum seller concession is $16,000 (4%). This can cover prepaids, discount points, and other buyer closing costs. Normal closing costs the seller pays do not count toward this limit. If the seller agrees to more than 4% in concessions, the excess must reduce the loan amount or sales price.
Under a temporary VA variance, Veterans are currently allowed to pay reasonable and customary buyer-broker charges directly. However, these charges cannot be financed into the VA loan. This means you may need to pay your buyer-agent fees out of pocket at closing.
Seller-paid buyer-broker fees are also allowed and are not counted as seller concessions. This is a temporary policy and may change. Always verify current rules with your lender and agent before making an offer. Your agent should disclose their compensation clearly and explain how it will be handled in your transaction.
The VA escape clause (also called the VA amendatory clause) is a required contract addendum that protects the buyer. It states that if the VA appraised value is below the contract price, the buyer is not obligated to complete the purchase and can recover their earnest money.
This clause only protects the buyer when the VA value is below the contract price. It does not cover all appraisal or deposit issues — for example, builder upgrade deposits or other non-VA appraisal-related concerns are not covered. The clause must be included in every VA purchase contract. It is not optional.
Some listing agents and sellers mistakenly believe this clause makes the buyer weak. In reality, it simply protects you from overpaying for a home that does not appraise. You can still choose to proceed if you pay the difference in cash, but you are not required to.
The VA appraisal includes a review of Minimum Property Requirements (MPRs) and an estimate of fair market value. If the appraiser is concerned the value may not meet the contract price, they can initiate the Tidewater Initiative. This allows the appraiser to request additional comparable sales or information from the listing agent before finalizing the value.
If the final appraisal is lower than the contract price, you have a few options: renegotiate the price with the seller, pay the difference in cash, or request a Reconsideration of Value (ROV). An ROV is not guaranteed to succeed and requires strong evidence, such as better comparable sales or proof of errors in the original appraisal.
The VA appraisal is not a home inspection. You should always get a separate home inspection to evaluate the roof, plumbing, electrical, and other systems.
The VA appraisal includes a review of Minimum Property Requirements (MPRs). If the appraiser identifies issues — such as peeling paint, broken windows, missing handrails, or safety hazards — repairs may be required before the loan can close.
Who pays for repairs? It is negotiable. The seller, buyer, or sometimes both can agree to make repairs. The VA does not require the seller to pay, but the repairs must be completed and re-inspected before closing. Discuss this with your agent before writing the offer.
VA loans limit the closing costs that the buyer can pay. The VA funding fee is the most significant buyer cost, though it can be financed into the loan. Other common costs include the appraisal fee, credit report, title insurance, recording fees, and prepaid taxes and insurance.
Certain fees — such as attorney fees, prepayment penalties, and real estate broker fees charged to the buyer — are not allowed on VA loans. The seller, lender, or agent may pay these, but they cannot be charged to the Veteran buyer. Ask your lender for a full breakdown.
In a competitive market, VA offers can win if presented correctly. Here is how to make your VA offer as strong as possible:
Official guidance on using a VA loan to purchase a home.
Information on VA appraisal timelines, fees, and the Tidewater process.
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