Using Your VA Home Loans to Buy Foreclosed Homes
VA loans can be used to purchase foreclosed properties as long as the VA guidelines are met. Foreclosures are controlled by the servicer of the loan and are usually sold in two different ways. In most cases, a foreclosed property will first be offered through auction by the county sheriff to the highest bidder. If the home fails to sell to a third party at auction, then the home may be acquired by the lender and then made available through typical real estate listings like the local MLS.
If a VA-eligible borrower bids on a foreclosed property at a foreclosure sale auction, he or she may discover that a large sum of cash is to be delivered as quickly as 48 hours after the bid is accepted.
Due to the cash requirement often associated with auctions, a VA borrower with sights set on a certain foreclosure may want to see if that home fails to sell at auction and is offered by the lender. Once it is offered through a regular real estate listing, the property can be closed within a more typical timeframe, commonly 30 or more days.
Also, foreclosures are often sold “AS IS.” Due to the VA owner-occupancy requirement, all homes financed with the VA guarantee must be in safe living condition. If repairs are needed before the home can pass VA appraisal/inspection, often the buyer will pay for them and incur the risk. The VA will not provide its guarantee on a home that does not appraise for its sales price.
The advantages of VA loans for any real estate purchase include:
- As little as no cash down
- No monthly mortgage insurance premiums
- No pre-payment penalties
- Competitive interest rates
- Seller can pay up to 4% closing costs
- Streamline interest rate reduction with less underwriting