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What Happens When a VA Property is Repossessed and Resold?


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TERMINOLOGY

If a home that is VA property is repossessed and goes into foreclosure, it may be put back on the market at a reduced price. Qualified military members can then buy the property for a discounted price, if they are eligible for a VA mortgage loan. If you are a military member and you want to look for repossessed property, the VA has a listing service available to search.

BAC Loan Servicing

If a home that was secured by a VA mortgage loan is repossessed, the VA sells the home through a company called BAC Loan Servicing. BAC maintains a listing of all property owned by the VA, and sells to any active or veteran member of the military. In order to buy the repossessed property, you must go through the loan application process with a lender that approves VA mortgage loans. 

Vendee Financing

Vendee financing is different than the usual VA mortgage loan because the owner does not have to use the property as their primary residence. It is available to active military members, as well as veterans. No appraisal is required, and credit score is not used to determine the qualification for vendee financing. A 15 year loan and a 30 year option are available using vendee financing. 

If you decide you want to buy a repossessed VA home, and you are going to occupy it as your primary residence, zero percent financing is available if you qualify. If you are going to use the property as a rental unit, you may be able to purchase the property by putting as little as five percent down. You have to disclose the amount of rent you intend to collect when applying for this type of VA loan.

The VA may require you to have had prior experience with property rentals in order for you to qualify for the loan. If you decide to buy more than one VA repossessed property for the purpose of renting, the number of vendee financing loans you can obtain is based on your ability to cover your debts, also know as the debt-to-income ratio. All credit must be paid in a prompt manner in order to qualify. 

VA Funding Fee

The VA Funding Fee for purchasing repossessed property from the VA is 2.25 percent. There is no penalty for prepaying your loan. The seller can pay as much as six percent of the sale price to be applied toward the closing costs.

If you are unsure of whether you will be able to get this financing, you can apply to be prequalified so that you will know the maximum price of the repossessed home you can afford. If you are interested in purchasing multiple repossessed properties, specify this before you try for your prequalification. You will then know the total amount in repossessed properties you can buy in order to stay within the VA vendee financing parameters.