Can I Buy A Foreclosed Home With A Va Loan
According to recent statistics, the average discount nationwide on a foreclosed home is 32.6%*. That means someone buying a foreclosure can potentially pay only 67.4% of the open market price for the home purchase.
can i buy a foreclosed home with a va loan
VA loans can be used to purchase foreclosed properties as long as the VA guidelines are met. Foreclosures are controlled by the servicer of the loan and are usually sold in two different ways. In most cases, a foreclosed property will first be offered through auction by the county sheriff to the highest bidder. If the home fails to sell to a third party at auction, then the home may be acquired by the lender and then made available through typical real estate listings like the local MLS.
Due to the cash requirement often associated with auctions, a VA borrower with sights set on a certain foreclosure may want to see if that home fails to sell at auction and is offered by the lender. Once it is offered through a regular real estate listing, the property can be closed within a more typical timeframe, commonly 30 or more days.
Are you interested in buying a foreclosed property? Foreclosures can be an excellent opportunity to purchase a home below market value, but they do come with their own special set of considerations. Keep reading to learn more about using a VA loan for a foreclosure and what to expect during the process.
This poses a serious hurdle to purchasing a foreclosure, as the homes are often in a state of disrepair and other loan programs have looser regulations. However, assuming that the property meets the following requirements or you are willing to pay for repairs out of pocket, you may still be able to move forward with a VA loan.
Despite the complexities of buying a foreclosure with a VA loan, they can still be an excellent opportunity to make a home purchase at an affordable price with a great rate. Working with a knowledgeable real estate agent can also give you the edge you need to find the right deal.
Because the lenders who own the home are eager to sell the property, it will likely be listed at a price below comparable homes in the area. This means you can leverage your loan to get a nicer home than may have been possible otherwise.
One of the most important steps in your home-buying journey will be getting pre-approved for a VA loan. This will make the process smoother and faster, giving you a better chance of winning that foreclosure!
When a home purchased with a VA mortgage is foreclosed upon, the VA must pay the lender the amount of the VA loan guaranty, and instead of the bank owning the property, the house becomes the property of the VA.
The Department of Veterans Affairs has no interest in handing onto these properties. Instead, they go up for sale via the VA Vendee Loan program which allows those eligible for VA mortgages and others to apply for a mortgage to purchase a foreclosed home. VA Vendee Loans are not specifically VA mortgages, though you can use a VA home loan to buy such properties if they meet VA requirements (see below).
The VA REO program is not limited to those who qualify for the VA home loan benefit. Nor is the program restriction to owner-occupiers. The list of those who may apply to purchase a VA REO home includes:
Because there are Vendee Financing loan options available from the official site which operates in partnership with the Department of Veterans Affairs, (VRM Mortgage Services) you may wish to consider a non-VA mortgage loan to purchase a VA REO home. Why? Because the VRM loans come with similar terms and conditions to VA mortgages including the following:
For such loans, qualified borrowers have the option to finance origination fees and loan funding fees. These homes have no appraisal requirement, but if you are using a VA mortgage to purchase instead of the other VRM mortgage options, VA loan rules state the home must be move-in ready.
Are you thinking about buying a foreclosed home? Encouraged by the popularity of television home renovation shows? Many people eagerly jump into foreclosed properties without understanding all of the pros and cons. Let Homes for Heroes help you understand what to expect with a foreclosed home.
An FHA home loan is an excellent option for those who qualify for the program. FHA requires the owner to move into the house within 60 days of purchase and live in it for the majority of the year. Also, the property must be in good condition before purchase.
Veterans can access a VA loan to buy a bank-owned property as long as the buyer plans to live in the house and the house is in livable condition. The VA mandates that VA loans can only apply to properties with a sound roof, mechanical system, windows, and lead-free paint. Thus, if you want to use a VA loan to buy a foreclosure, you should focus your house search on properties in habitable condition.
Smart renovators also recommend that you consider how much of a renovation project fits your lifestyle. Do you want to live without a kitchen for three months? Does the prospect of scraping peeling wallpaper from all the rooms in your new house send you searching for a painting contractor? Does the idea of getting the windows and doors replaced make you want to hop online for an extensive search? Whatever you do, make sure that you know your capabilities before you commit to purchasing a foreclosed home.
Unlike most good faith deposits, the money you put down as a good faith deposit with your purchase offer on a foreclosed home is typically not refundable. Since foreclosed houses will sell as-is, the buyer cannot attach inspection contingencies. Be very sure that you want the house before you make an offer.
Finally, getting into a desirable neighborhood by purchasing a foreclosure is a terrific option for homebuyers. Buying a foreclosure home does come with unique considerations for the buyer, and it is essential that you receive experienced expert advice to guide you through the process.
Sign up to speak with your local Homes for Heroes specialist, with no obligation, and get your questions answered regarding foreclosed homes, the options available to you, and more information about the $3,000 average savings Homes for Heroes specialists can provide when you buy or sell a home with them.
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Foreclosures can be difficult to find and price, so try to work with a real estate agent that specializes in them. An agent who is knowledgeable about the foreclosure process can represent your interests and keep the transaction moving. One strategy for finding the right agent is to visit websites with a database of foreclosed homes in your desired area. Look for Realtors who have specialized real estate training in this area, such as the Certified Distressed Property Expert (CDPE) or the Short Sales and Foreclosure Resource (SFR) designations.
The VA puts their home on the market and does not budge significantly during negotiations. However, they are aggressive with price drops approximately every 30 days. So if your target property is overpriced and they are not budging, it might be worth trying again once the property has been on the market just under 30 days. Often they will drop the price $5000 or $10,000 if it is still on the market at that point. At 60 days, they will often do another $5000 or $10,000 price drop.
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USDA loans do not require a down payment, making them an excellent choice for foreclosures. It's not uncommon to find foreclosed homes needing a little extra love, and the money saved by not having a down payment can help cover needed renovations.
USDA homebuyers should know that banks don't typically sell directly to the buyer but will instead list the property through a local real estate agent. You can find these properties through an experienced real estate agent, by inquiring with local banks, or on HUD's foreclosure directory.
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