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Buying a VA Loan Foreclosure? 4 Things You Need to Know

Using your VA loan benefit to purchase a foreclosed home provides some homebuyers the chance at getting a new home under market value. But distressed properties often come with their own challenges, with some of the biggest rooted in the home’s condition and upkeep.

Can You Buy a VA Foreclosure with a VA Loan?

Yes, it is possible to use your VA loan benefit to purchase a foreclosure or otherwise distressed property as long as it meets the VA’s broad property condition guidelines.

Buying a foreclosure can look different from your run-of-the-mill home purchase. Foreclosures typically go through an auction with the county sheriff. In the event it fails to sell, it may go to a third-party auction.

Here are four key things that prospective buyers need to know about using their VA home loan benefit to buy a foreclosure.

1. The Savings Can Be Big

Foreclosures can present buyers with a significant savings opportunity. Every market is different, but distressed properties typically sell for less than other homes available.

Today’s white-hot housing market has cut into those savings a bit. Homes in foreclosure cost about 86% of market value, according to recent data from

Still, a discount is still a discount, and with home purchases you’re still looking at saving thousands or even tens of thousands of dollars.

2. Getting Preapproved is Essential

Getting preapproved is a key step for VA buyers, no matter what kind of home they’re hoping to purchase. Loan preapproval shows sellers you’re a strong candidate to close, and that you have the credit and finances to follow through on what’s hopefully a strong offer.

Banks and other entities often own foreclosed properties, and your preapproval letter is an important signal that you have what it takes to close the deal.

Preapproval typically means having a lender assess your credit, finances and employment. You can often get preapproved in minutes, and this isn’t a binding step or any guarantee of financing.

3. Foreclosures Can Be Tough for the VA Appraisal

The VA appraisal process has two pieces. The first focuses on determining the property’s fair market value, like any other residential appraisal. The second piece is meeting the VA’s broad property condition guidelines, known as the Minimum Property Requirements.

These high-level guidelines look at things like the remaining life of the home’s mechanical systems, access and space requirements, water supply and more. The goal is to help ensure Veterans purchase homes that are safe and sound.

Some of these guidelines can pose a challenge for distressed properties that might not be in prime selling condition. Some foreclosures might sit empty on the market for months or even years.

Just having issues come up during the appraisal isn’t an automatic deal-breaker. Normally, sellers or even VA buyers can pay to make repairs in order to keep the loan moving forward. But foreclosures are often owned by banks or other entities that will not make repairs or even allow them to be made to the property.

Many of these properties are sold “as-is,” meaning no repairs can be made before closing. That can be a major problem for VA loans in some cases.

4. The VA Foreclosed Homes List

The Department of Veterans Affairs (VA) acquires properties due to foreclosures on VA guaranteed loans. Veterans and civilians can purchase these homes.

A private company manages this portfolio of homes for the loan program. Veterans can search for VA foreclosures in their area at the company’s home search portal.

Again, Veterans can absolutely use their VA loan benefit to purchase foreclosed homes. Lenders with a deep knowledge of the VA loan program can be especially helpful if you’re hoping to snag a serious discount on a distressed property.