How Can I Buy a VA REO Home?
The 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.