A type of government foreclosures. VA foreclosures are guaranteed by the Dept. of Veterans Affairs (VA). If the owner does not make mortgage payments, the home is repossessed and sold.
Buying foreclosures has become a very popular past time for regular home buyers and investors alike. One area of interest is VA foreclosures because they offer some unique financing opportunities that are not seen in many other foreclosure opportunities. Before you starting to look for these types of properties, it's important to understand how they come about and how to get through the process of purchasing a VA foreclosure.
VA stands for the Department of Veterans Affairs. The United States developed a government run military veteran benefits system as a way of assisting veterans of the United States Armed Forces and their families with specific benefits aimed at making their lives better. Some of these benefits include things such as home loans, pension, education, survivor benefits, burial benefits, medical benefits and vocational rehabilitation.
One of the most popular benefits that the VA provides is a guarantee for home loans. When an eligible veteran purchases of property using a VA loan, the VA guarantees the loan. That means that if the veteran stops paying for some reason, the VA has to foreclose on the property. Just like other foreclosure opportunities, these VA foreclosures are becoming more regular.
So how do you go about purchasing a foreclosure from the VA? When purchasing a property from the VA, it's important to note that there are certain documents which must be used. Unlike many other real estate deals where you can just use the standard state purchase and sale agreement, the VA has a special contract and package of paperwork that must be used. There is a VA offer to purchase form in addition to a VA Vendee flyer, instructions for VA offer to purchase, radon gas and mold disclaimer, and a seller's disclosure statement. The VA will not accept incomplete packages, so make sure to work closely with your real estate professional to ensure that everything is in order before submission.
You can find a listing of VA properties at Foreclosure Deals. Each home is listed with a special agent who is certified to sell VA properties. If you have questions, your agent should be able to directly access the listing agent who is managing the property. You do not have to be a veteran to purchase a VA owned property. In fact, anyone is eligible to purchase a VA foreclosure as long as they can qualify for their loan or pay cash.
VA Home Loan Program
There are a couple of interesting options for financing on a VA foreclosure. The first is called the VA Home Loan Program. Only certain people are eligible for this program including veterans, active-duty personnel, specific reservists and National Guard members, surviving spouses of people to have died in active-duty or as a result of disabilities obtained during service and specific spouses to active-duty personnel who are missing in action, forcibly detained by a foreign government or were captured in the line of duty by a hostile force.
To get this loan, you go through a private lender and the VA guarantees the loan with that lender. In other words, if something goes wrong and you cannot make the payments, the lending institution would go to the VA to cover their losses. The VA is basically a guarantor, much like insurance, to the lender. The VA doesn't get involved in the loan approval process as that is handled entirely by the private lender.
The attraction of this type of loan is that there is no down payment required as long as the price doesn't go above the appraised value. You also have to qualify for the loan using your credit and income. You will need to purchase any private mortgage insurance, and the VA limits how much the lender can charge you for closing costs. You can also negotiate that the seller pays the closing costs. There is no prepayment penalty for paying the loan off early. In order to use this loan, you don't have to be a first-time home buyer, and you can reuse the benefit if you ever sell the property. VA loans are also one of the last remaining assumable loans as long as the person qualifies.
Vendee financing Program
Another kind of loan is called the Vendee Financing Program. Any purchaser can apply for this kind of financing, so you don't have to be a veteran. It's available for owner occupied and non-owner occupied properties that are offered for sale. The financing is only used for VA real estate owned properties. The seller can give up to 3% of the sales price for closing costs, prepaid and other expenses to close the loan. Buyers like this option as it saves them tons of money when the seller contributes to their cost of closing. These loans are also assumable as long as the new buyer can qualify. Vendee mortgages have low interest rates, no prepayment penalties and are available for 15 or 30 year fixed-rate terms. This kind of financing is not driven by credit score, but does include a VA funding fee of 2.25%. The funding fee cannot be included in the seller concessions.
For an owner-occupied purchase, buyers may put as little as 0% down. For non-owner occupied purchases, buyers would have to give at least 5% down. There is no maximum number of investment properties, however, making VA foreclosures an attractive investor option. Another perk is that no appraisal is required for financing.
It's easy to see why people are so excited about purchasing VA foreclosures. If you can qualify, the Vendee Financing Program is a great way to go in today's competitive mortgage market. Because the product is not credit score driven, often buyers can get this kind of loan when they may not qualify for many other loan products. Of course, qualification is still required so buyer will need income and a reasonable credit score in order to make it through the qualification process. VA foreclosures are increasingly popular with both owner-occupied buyers and investors.
You can find VA foreclosure homes through foreclosure listings on ForeclosureDeals.com, or by contacting a real estate agent.
To purchase a VA property, you need to submit an offer through a real estate agent. The agent submits the offer by form via mail, fax, or online. If your offer is accepted, your agent will be notified.
If you are planning to purchase a VA property, you must be eligible for a VA loan as you cannot obtain a conventional home loan and you must also be planning to live in the home and rental properties are not eligible for a VA loan.
A VA property usually requires a deposit anywhere from $100.00 up to 5% of the property value.
Yes, the VA does offer loans for manufactured homes. As with other types of property, the VA does not finance the loan itself, but merely guarantees the loan to the lending company.
It depends on the lender. Many major banks do manual underwriting. USAA is one example. Check with various home loan companies in your area and ask them directly if they do manual under writing for VA homes.
No, asking the VA a question about a loan that was foreclosed on over seven years ago and is no longer on the credit report will not renew the seven-year mark. Foreclosures go on your credit report for seven years, where they can be readily viewed by anyone who inquires into your record (such as a lender when you apply for a mortgage). A lender will not be able to tell if you have a past foreclosure beyond seven years unless you tell them yourself - and even if they ask, the foreclosure is considered in the past and is not on your record. Lenders still have discretion to use any information you give them to consider whether or not to approve your loan.
If a home has been foreclosed, it cannot be saved in terms of preventing the bank or the VA from taking possession. The only way to keep a home out of the VA's control is to keep the foreclosure from occurring, which can be accomplished by loan modification programs with state and federal governments, or by talking to the lender and working out an arrangement. There are a variety of options - including loan modifications - available to the homeowner before foreclosure through the VA.
The VA buyback program - known as refunding - allows for the VA to buy back the mortgage from the lender in the event that a homeowner is pursuing a loan modification. This typically happens if the homeowner becomes unable to pay the mortgage and does not want to risk foreclosure, and cannot obtain a loan modification. Refunding is preferable to the homeowner because foreclosure stains your credit record for seven years and usually prevents you from financing another home loan during that period of time. Typically, though, the VA will work with the veteran on a variety of home loan modification options before trying refunding as an alternative. The agency views foreclosure as a last resort.
The VA requires that a property purchased with a VA-backed loan pass an inspection, which really is more like an appraisal that the government orders to ensure that the home is worth the amount of money being guaranteed. This is to protect the veteran and also protect the VA and the lender. The VA is quite particular about heating and cooling, broken windows, acceptable electricity, roof leaks, and external conditions (such as paint/siding, etc.). In the event that a home fails the VA inspection, the seller is obligated under the contract to make the necessary repairs at their cost to bring the house up to an acceptable standard. If the seller does not agree to the repairs, the buyer can then cancel the contract or pay for the repairs themselves.
Online listing services routinely feature VA repo housing, or homes that have been repossessed by the VA for failure of the previous owner to pay. The HUD Home Store also features VA repo housing, along with foreclosures and properties from eight other government agencies. Real estate brokers who are approved by the VA can also be found usually in your local area and are the points of contact for the listings in a particular region.