VA Loan Articles
News, updates, and explanations to keep you informed.
Does the VA Own Property for Sale?
As in any other part of the housing market, some homes purchased with VA loans wind up being repossessed and resold. When homes purchased with conventional loans go into foreclosure, they may be put back on the market with reduced prices, offering qualified buyers a discount and a way to get more home for less money.
When homes purchased with a VA loan are repossessed and put back on the market, the VA-owned properties are sold through a company called BAC Loan Servicing. BAC lists and sells the VA-owned properties, and any veteran or active duty member who qualifies can purchase one of these homes with a VA home loan.
This type of VA loan is called "vendee financing" and is available through the VA to both vets and non-veterans alike. It's a unique program that has many of the same features of a typical VA loan. Credit score is not the qualifying factor in these VA loans, and an appraisal is not required. Vendee financing comes in two terms., a 15-year loan and a 30-year option.
Vendee financing differs from a typical VA home loan because it places no "owner/occupant" requirement. You can purchase a VA-owned property without intending to live there as your primary residence. In these cases, the loan terms are slightly different. If you plan to buy a VA-owned property and convert it to a rental unit, for example, the terms of the loan are financed with as little as 5% down payment. Those who purchase a VA property intending to use it for their primary residence may qualify for 0% financing according to the VA's fact sheet on vendee financing.
Those who want to buy VA owned properties with the intention to rent must list a projected rental fee amount when applying for this type of VA home loan. Potential landlords may be asked to show expertise or experience in property management as a qualifying condition of the VA loan. There is no maximum number of properties you may buy under this program, but those who wish to purchase multiple properties with VA loans under vendee financing may be limited by debt-to-income ratios or other factors that figure into establishing creditworthiness.
If you're considering a VA loan to purchase a VA-owned property, there is a 2.25% VA funding fee, no penalty for prepayment, and the seller is allowed to contribute up to 6% of the sale price towards closing costs. As with other VA mortgage products, you may prequalify for a vendee financing loan to help you locate properties within your approved price range.
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