VA repossessions occur when homes that used to have loans guaranteed by the U.S. Department of Veterans Affairs are foreclosed. Real estate investors will find all kinds of homes to choose from – from single family houses to duplexes, triplexes, not to mention condominiums and townhouses. And best of all, you don’t have to be a veteran to buy VA foreclosures or assume a VA home loan.
Created in 1944, the Department Veterans Administration – which was succeeded in 1989 by the Department of Veterans Affairs – was established for the purpose of helping men and women who have served in the armed force with various benefits. The VA provides a wide range of federal benefits to veterans and their dependents, including health care, financial assistance, burial assistance and home loan assistance.
VA Home Loan Program
Under the VA home loan program, veteran borrowers can purchase a home with no money down. VA home loan requirements are fairly liberal when compared with other loan programs. For example, under many conventional loan programs, personal bankruptcies within five years of applying for a loan would disqualify the applicant. Under the VA program, however, veterans with bad credit or bankruptcies could get a VA home loan.
Other benefits offered to veterans under the VA program include:
- No down payment required.
- VA closing costs and other fees can be financed.
- VA loans can be assumed.
- No mortgage insurance premiums.
- No mortgage prepayment penalties.
Lenders like to work with the VA because they provide lending institutions with a guarantee that loans made to veterans will be repaid in full in the event of default by a veteran borrower.
Currently, the VA has awarded a contract to Ocwen Financial Corporation to manage all VA foreclosures. Ocwen offers VA properties for sale through a national network of participating real estate offices. Investors can find VA foreclosures anywhere in the country by going to RealtyTrac’s website at www.realtytrac.com. The website allows investors to search by state, county, city or zip code for government-owned foreclosure opportunities. Property details are listed on the website, including sales price, property address, square footage, photographs, a mapping tool and contact information for the listing agent.
Because many of these houses are highly leveraged, the VA can have a hard time selling VA foreclosed homes – unless they offer them at a discount. For investors, if you happen to live in or near a large military base, the opportunities to invest in VA foreclosures are likely to be greater due to the higher concentration of veterans who live in the area.
Special VA Home Loan Financing
In addition to controlling the listing contract for VA foreclosed homes, Ocwen Federal Bank offers financing programs for both veterans and non-veteran investors alike.
The program is known as the VA Vendee Financing Program and the benefits include:
- No down payment for owner occupants.
- Low down payments of only 5 percent for non-owner occupants (investors).
- No appraisal fees.
- Competitive fixed rate mortgages.
Investing in VA Foreclosures
Buying and selling VA foreclosures represents a viable investment opportunity for real estate investors. Frequently, VA foreclosures are listed below market value. But with VA properties, investors need to understand that all sales are “as is.” That means investors must inspect a property as thoroughly as possible before placing a written offer. Many VA repos sit vacant for months or more. The VA does not guarantee foreclosed homes in any way, shape or form. Once you buy a VA foreclosure, it’s yours for better or for worse. So a thorough inspection by a professional licensed home inspector is a must.
After your inspection, you’ll need to have your realtor or the listing broker prepare the offer and complete all the necessary documentation. The bid must be submitted on a special VA contract form, and your broker must be registered with the VA to submit offers. Then, the listing broker will present the offer to Ocwen for approval. It typically takes two weeks or more to hear from the VA – and only the winning buyer will be notified by mail.
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