Are you interested in buying a foreclosed property? Foreclosures can be an excellent opportunity to purchase a home below market value, but they do come with their own special set of considerations. Keep reading to learn more about using a VA loan for a foreclosure and what to expect during the process.
Can You Buy a Foreclosure with a VA Loan?
The short answer is yes, VA loans are available for foreclosed properties. The longer answer, however, is that it’s not always easy to purchase a foreclosure if you intend to use a VA loan.
Foreclosures can be difficult to purchase in the first place, as they’re often bought with cash by investors. Cash deals are hard to compete with, especially when lenders are eager to offload a property. They’re also often bought at auction, which can be a competitive and intimidating process if you’re not accustomed to it.
One of the most significant sticking points for using a VA loan to buy a foreclosure is that they’re often sold as-is, meaning that there will be no repairs made to the property before closing. The reason this matters is that the US Department of Veterans Affairs has pretty strict requirements that a property is in good condition before it’s eligible for a VA loan.
VA Loan Requirements for Purchasing a Foreclosure
The VA has minimum property requirements that must be established before a VA loan can be issued. Homeowners who know foreclosure is coming are likely to avoid making substantive repairs to the property, and the lenders who now own the property want to recoup their losses as quickly as possible.
This poses a serious hurdle to purchasing a foreclosure, as the homes are often in a state of disrepair and other loan programs have looser regulations. However, assuming that the property meets the following requirements or you are willing to pay for repairs out of pocket, you may still be able to move forward with a VA loan.
VA Loan Minimum Property Requirements:
- Mechanical systems such as electrical, plumbing, and heating are in working order
- Major appliances work properly
- No broken or missing handrails or windows
- No lead-based paint present
- Roof is in good condition
- No outstanding code violations
- No mold, fungus, or insects present
- Foundation and crawl space is in good condition
While this is not an exhaustive list, if the foreclosure in question meets all of these criteria, you are well on your way to getting approved for a VA loan!
Benefits of Purchasing a Foreclosed Home with a VA Loan
Despite the complexities of buying a foreclosure with a VA loan, they can still be an excellent opportunity to make a home purchase at an affordable price with a great rate. Working with a knowledgeable real estate agent can also give you the edge you need to find the right deal.
Because the lenders who own the home are eager to sell the property, it will likely be listed at a price below comparable homes in the area. This means you can leverage your loan to get a nicer home than may have been possible otherwise.
Another VA home loan benefit is that they require no money down. This means that you’ll have more cash to work with should you want to make improvements to the property. So long as the home meets the minimum requirements, you’ll have more freedom to make cosmetic repairs or modifications.
Next Steps for Buying a Foreclosed Home with a VA Loan
One of the most important steps in your home-buying journey will be getting pre-approved for a VA loan. This will make the process smoother and faster, giving you a better chance of winning that foreclosure!
If you’re ready to get started or have questions about the details, VA Loans for Vets is here to guide you. Founded by a veteran, our mission is to help other vets and active-duty service members purchase the home of their dreams.
Please give us a call today at 602-908-5849 or view the resources page of our website for more information!