Tips & Special Topics
VA-owned Properties for Sale
Added January 19, 2011 | Updated January 20, 2011
Sometimes, the U.S. Department of Veterans Affairs (VA) acquires properties that are repossessed as a result of VA loan foreclosure. A VA Real Estate Owned (REO) property is one that becomes the possession of the VA after the mortgage company attempts to auction a foreclosed property and fails.
BAC Home Loan Servicing, LP is a company that was awarded the contract with the VA to manage VA REO inventory. The BAC lists the VA-owned properties, or VA REOs, on local Multiple Listing Sites (MLS). VA acquired properties are also listed for sale at http://va.equator.com, a site that lists VA-owned properties for sale. VA REO properties can also be found through local Multi Listing Systems (MLS).
Any qualified veterans and non-veterans alike can purchase VA-owned properties for sale. The properties don’t have to be financed with a VA loan. Qualified veterans and active duty military personnel can certainly use the VA Home Loan Guaranty Program to purchase a VA-acquired home.
Additionally, buyers interested in purchasing VA REO properties should know about a program called VA Vendee Financing. Vendee financing is a loan product offered to individuals to help finance the purchase of VA REO properties. Vendee loans are offered to both veterans and non-veterans. Vendee financing may not be available for all VA-acquired properties, and some of the guidelines for Vendee funding are listed below:
• Seller may pay up to 6% of Vendee loan fees and closing costs
• Vendee mortgages are assumable by qualified borrowers
• Vendee financing is available in 15 and 30 year fixed-rate terms
Much like VA loans, there is a VA funding fee associated with Vendee financing. The VA funding fee for Vendee financing is 2.25%.
Vendee loans, unlike VA home loans, do not require owner occupancy. Rather, homes financed with Vendee loans can be either owner occupied or non-owner occupied. In an owner-occupancy situation, a home can be financed with as little as zero down payment. And, the total loan amount can be increased by up to two percent to include closing costs. The Vendee funding fee may not be rolled into the loan, but can be paid by the seller.
For a non-owner-occupied purchase, Vendee funding can be obtained by qualified borrowers with as little as five percent down payment. The assumption with non-owner-occupied purchases is that the home will be used as investment property. Therefore, an investor may use up to seventy-five percent of the projected rent money to offset the monthly payment on the property. The rent projection will be based on an appraiser’s estimate. If Vendee financing is obtained for a non-owner-occupied purchase, investors must prove experience in property management. With Vendee financing, there is no maximum number of properties that can be financed for investment purposes. Unlike VA loans, there is no entitlement.
Other benefits associated with Vendee financing include:
• No prepayment penalties
• No appraisal needed for underwriting
Like VA home loan borrowers, Vendee borrowers must show adequate income to qualify. And, like the VA home loan program, though there is no credit score minimum published in the guidelines, Vendee borrowers must be an acceptable credit risk.
For more information on financing a VA-acquired property with a VA loan or to get more information on Vendee financing, contact an experienced mortgage professional.
