VA measures the 4% against the reasonable value on the Notice of Value (VA’s appraisal document), not the contract price. It covers the VA funding fee, a temporary buydown, prepaid taxes and insurance, payoff of the buyer’s debts, discount points beyond what the market normally requires, and gifts like appliances. Put each item in the contract with a dollar amount and a purpose.

Some seller payments don’t count against the 4%. The seller can pay the veteran’s typical closing costs (title fees, government fees and similar) and market-normal discount points toward a permanent rate buydown without using any of it. A good lender can structure the loan around the veteran’s goals, whether that’s lower closing costs or a lower APR. Have your buyer reach out to me if their lender hasn’t discussed these options.

Sources: VA Lenders Handbook (Pamphlet 26-7), Chapter 8; Pikes Peak Association of REALTORS, Market Snapshot, September 2026

A 2-1 Buydown Fits Inside the 4%

At the national average 30-year VA purchase rate of 7.17% on October 20, 2026 (Bankrate), a $450,000 loan has a $3,045 principal and interest payment. A seller-funded 2-1 buydown cuts it to $2,463 in year one and $2,747 in year two. The buyer still qualifies at the full note rate, so a buydown doesn’t add buying power. A 2-1 buydown costs about $10,570 upfront, leaving $7,430 for other concessions. The same $10,570 buys about 2.35 discount points, which at roughly 0.25% of rate per point save about $178 a month for the life of the loan.

Any seller-funded buydown, whether 1-0, 2-1 or 3-2-1, costs exactly what it saves the buyer in payments. Spend the same dollars on permanent points and points pull ahead after about 60 months, so the buydown fits a buyer who’ll sell or refinance sooner and points fit one who’ll stay longer. Point pricing varies by lender, and I can quote all options.

Trends: VA purchase rates are flat over October, while refi rates are up.

VA rates reflect national averages as of October 20, 2026 per Bankrate. Conventional figure per Freddie Mac’s Primary Mortgage Market Survey (week of October 15, 2026). Rates change daily and aren’t a commitment to lend.

IRRRL Viability

Based on the current VA refi APR of 7.87%, the estimated minimum viable existing mortgage threshold is around 8.95%. In other words, if your existing mortgage rate is 8.95% or higher, an IRRRL is likely worth the closing costs on a straight math basis. This assumes 2% closing costs plus a 0.5% funding fee spread, and that the borrower doesn’t extend the existing loan term (VA’s own Net Tangible Benefit test is separate and has its own criteria; confirm the file meets it independently before moving forward). For model assumptions and to personalize borrower variables, use the IRRRL Viability calculator at my website HERE.

Gene Richter, NMLS #2806488 · PBT Bancorp, NMLS #257781

🏠 Equal Housing Opportunity

I’ll be changing things up starting next month; if you have any input on what’s working or what you’d like to see more of, please let me know by replying or clicking the box above. Be sure to ask for seller concessions on every VA offer. November’s issue starts the Buyers Market series.

To review the full October issue, visit this link.

Gene Richter, Licensed Mortgage Loan Originator, NMLS #2806488 · PBT Bancorp, NMLS #257781 · Colorado Springs, CO (719) 722-4278 · VASpotlight.com

🏠 Equal Housing Opportunity | This newsletter is intended for real estate professionals and does not constitute a consumer credit advertisement. Rates shown are national averages for informational purposes only and are not a commitment to lend. Not all borrowers will qualify. This content does not constitute tax, legal, or financial advice. Consult a qualified professional for guidance specific to your situation. Gene Richter is a licensed Mortgage Loan Originator (NMLS #2806488) operating through PBT Bancorp (NMLS #257781), licensed to originate mortgage loans in Colorado.