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How Can I Buy a VA REO Home?

va foreclosuresThe Department of Veterans Affairs offers foreclosed homes, also known as real estate owned homes (REO), for sale to veterans and civilians alike. Since the VA insures mortgages under the VA loan program, if the property goes into default and foreclosure, the VA recoups its losses by selling the foreclosed home.

The VA doesn’t lend money directly, it works with participating lenders, and it also does not sell its REO homes directly. For that, the government has contracted a company called BAC Home Loan Servicing, which is responsible for listing and selling VA REO homes.

Buyers can locate a VA REO home through BAC based on property location, price range and other criteria.

It’s true that VA doesn’t sell the properties, but it does offer is a financing program called Vendee Financing. This VA-insured loan program is designed to help borrowers (military and civilian) purchase VA REO homes under terms and conditions similar to those available to veterans under the VA loan program.

Under the Vendee Financing program, there is a 15-year loan available as well as a 30-year term, the properties are available to both owner-occupiers and non-resident owners alike, and the seller may contribute up to three percent of the sales price to pay for the VA loan funding fee, closing costs and other expenses.

Those who intend to occupy the property can get a no-money-down VA Vendee Financing loan, while those who want to purchase but not occupy can apply for a loan with a minimum five percent down. Zero-money-down loans can be increased by as much as 2% in order to include closing costs, prepaid expenses and other costs into the loan amount. The VA loan funding fee is not permitted to be included in the loan amount.

Vendee Financing, like other VA home loans, is not a “credit score-driven product,” meaning that the Department of Veterans Affairs uses the same criteria for Vendee Financing loans as it does for other VA-insured loans. The record of reliable payments, debt-to-income ratio and other criteria are just as important with these types of VA loans as with more typical VA mortgages.

Those who want to review and make an offer on VA REO properties can start their house hunting online or they can contact a participating VA lender to apply for VA Vendee Financing.

About Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.

7 Responses to How Can I Buy a VA REO Home?

  1. barbara cain says:

    if you had a va loan years ago and you had trouble in the family and had to let the va repposs the property what are your chances of getting another if you have good credit and good job

  2. barbara cain says:

    if you had a va loan years ago and you had trouble in the family and had to let the va repposs the property what are your chances of getting another loan with va if you have good credit and good job

    • Joe Wallace says:

      That would depend on whether you owe the government money on the original transaction–any indebtedness as a result of the repossession would need to be settled first.

  3. Who can I talk to about one of these type homes. I live in Paris, Tennessee and would like to know if any or available in this or the surrounding area.

    Thanks !

    Edward E. Howard

  4. Mark Dunaway says:

    Many Real Estate agents are clueless about VA Vendee Financing etc. I am not a Veteran but I am interested in VA REO’s. How does someone go about finding a reputable Real Estate agent who understands the processes of buying a VA foreclosure home?

    • Joe Wallace says:

      You would need to search the real estate agents in your area, but if you are working with one currently who does not undetstand VA policy you can always have them contact the VA directly for assistance in learning more about the Vendee Financing program. 1-800-827-1000.

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