Buying A VA Foreclosure: A Complete Guide To Purchasing A VA Foreclosed Home

Foreclosure presents a difficult situation for any homeowner, and those with a VA loan are no exception. Foreclosure is a process that starts when a homeowner stops making mortgage payments. When a home is foreclosed on, a lender usually repossesses the property and then resells it to recover monetary loss. As with any home, VA homes can also be foreclosed and open to resale.

What Is A VA Foreclosure?

Homes purchased with a Department of Veterans Affairs (VA) home loan are subject to foreclosure if the owner defaults on their mortgage. Also known as a VA real estate-owned (REO) property, this type of property will be repossessed by the VA if it isn’t sold at an auction or a short sale.

As with any home foreclosure, a VA property that’s been foreclosed is typically available at a fraction of the price of first-run retail real estate. However, since VA foreclosures are sold as is, buyers may need to devote more effort and upkeep to the home than they would with a more traditional type of real estate transaction.

Before getting started, you’ll need to know what it takes to buy a VA foreclosure and how to maintain (or rehab) the property.

Who Can Buy A VA Foreclosure?

The short answer is that anyone can buy a VA foreclosure. Homes acquired by the VA through foreclosures on a VA mortgage are available for purchase by any prospective home buyer regardless of whether that buyer has a military background.

This includes real estate investors eager to purchase VA foreclosures at a fraction of the initial asking price.

Be ready to take advantage of these discount opportunities by getting approved so you can submit an offer as soon as you find the right home.

Pros And Cons Of Buying VA Foreclosures

As with any real estate investment, a VA loan foreclosure comes with advantages and disadvantages you’ll want to consider as you decide whether to add a VA foreclosed home to your real estate portfolio or have it serve as your personal living space.

Pros of Buying VA Foreclosures

Here are some of the advantages of purchasing a VA foreclosure:

• VA foreclosures are available to those who have no military affiliation and those who do.
• You can purchase a VA foreclosure at a lower price than typical homes in the area.
• Home rehabbers and DIYers enjoy ample opportunity to remodel VA foreclosures.

Cons of Buying VA Foreclosures

Here are some of the disadvantages associated with buying a VA foreclosure:

• Homes sold as is could come with maintenance problems.
• You may have to evict squatters who take up residence in a foreclosed home.
• Additional hidden costs and expenses may be attached to home renovations.

How To Buy A VA Foreclosure

Looking to pick up a VA foreclosure for purposes of renovation and residence? Or, do you perhaps wish to add a VA foreclosed home to your financial holdings as a potential real estate investment? The steps of buying a VA foreclosure can be similar to buying a foreclosed home that isn’t a VA REO.

1. Work with a real estate agent:

Few professionals know the specific ins and outs of a property’s market, and will be able to identify a great opportunity or bargain, like a local real estate agent. You’ll want to work with an agent who can help you identify and home in on the VA foreclosed properties to purchase while keeping you up to date on trends in the area. As part of their support and services, your real estate agent can help you find VA foreclosures using the multiple listing service (MLS).

2. Seek Veterans Affairs REO homes for sale:

On the hunt for a value-priced VA foreclosure? Along with sometimes being available at an auction or a short sale, VA REO homes can be found through an agent or broker. Since all VA REO foreclosed homes will be sold as is, what you see is what you get – the house will be placed for sale in its current condition, for better or worse.

3. Get a mortgage preapproval:

Getting preapproved for a mortgage can improve your chances of purchasing any type of home – and VA foreclosed homes are no exception. Preapproval should instill some degree of confidence in the VA that you’re a serious buyer with the financial backing to make the purchase.

Becoming preapproved also gives you the flexibility to move fast once you find a property you like. An offer may get accepted the same day you submit it, depending on the housing market where you’re buying.

4. Have an appraisal and inspection done:

As with any type of real estate transaction, the purchase of a VA foreclosure requires some time and effort. For example, your lender will likely require a home appraisal. Also, you’ll want to have the home professionally inspected since it can be sold in any condition.

5. Close on your new home:

The last step is to close on the home, pay any closing costs and ensure that all paperwork and research have been done so ownership and title will be properly transferred. You’ll close at a preset date and time at which any remaining balances must be paid and loan conditions must be satisfied, with the help of various real estate professionals.

How Long Does It Take To Close On A VA Foreclosure?

Once a VA home foreclosure has been listed on the MLS, the closing process shouldn’t take any longer than it does with other types of real estate transactions.

Can You Buy VA Foreclosure Homes With A VA Loan?

If you’re an eligible active-duty service member, veteran, reservist, member of the National Guard, or a surviving spouse, you can buy a VA REO home using a VA home loan. In fact, doing so has several benefits. For example:

• You can buy a home with no money down.
• You don’t have to pay for private mortgage insurance (PMI), although there’s a VA funding fee that can largely be built into the loan.
• You may use the VA IRRRL to refinance to a lower interest rate.
• The seller may contribute to the closing costs.
• VA mortgages are assumable.

The Bottom Line: A VA Foreclosed Home May Be Right For You

A VA foreclosure presents an opportunity for anyone to buy a property at a fraction of the original cost. At the same time, this type of property is sold in as is condition and may need significant work.

As when buying any foreclosed property, it helps when purchasing a VA foreclosure to pair up with a trusted real estate professional who can provide advice and feedback. Likewise, you’ll want to take some time upfront – before putting in an offer – to extensively research properties, neighborhoods and local real estate markets.

Want to get started on the purchase of a VA foreclosure? Those looking to secure funding can apply for initial mortgage approval with Rocket Mortgage^®.