Foreclosed homes can be a fantastic investment opportunity for homebuyers, as they often come with price tags that are below the market average.
And guess what? If you're a Veteran, now’s your chance to make your foreclosed home dreams come true. Stick around as I show you how it's done. Let's get started!
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The VA has set minimum property requirements to safeguard veterans and lenders.
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When homes are foreclosed, they're usually sold just as they are, which means they might need fixing up before you can move in.
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The VA appraisal is there to make sure military members don't end up buying a home that's in bad shape and could become unsafe later.
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Even though you don't have to get an inspection with a VA loan, it's a good idea to do it if you're buying a foreclosed home.
Key Takeaways:
Understanding Foreclosed Homes
Let's break down what exactly a foreclosed home means!
Simply put, it's a property that the lender has taken back from the borrower due to non-payment of the mortgage. These homes are typically sold at a discounted price, making them attractive to buyers looking for a bargain.
When you're buying a foreclosed home, the way you bid and buy it might not be the same as with regular homes. However, if the property isn't being sold only for cash at an auction, you can still get a loan to buy it.
On that note, let’s jump right into the perks of using a VA loan before we explore how you can use one to buy a foreclosed home.
8 Benefits of VA Loans
From skipping the down payment to avoiding mortgage insurance, there are some other best VA loan benefits you should know.
1. Provides Government Guarantee
It helps you find any problems early on, which can save you a ton of money and headaches later.
2. Competitive Rates
VA loans are offered by different lenders, so you can shop around for the best rates that fit your budget.
3. No Penalties
You can sell your home or refinance your loan without any penalties, giving you flexibility.
4. Versatility
VA loans can be used for various types of homes and even for making home improvements.
5. Easier Qualification
VA loans have more flexible guidelines compared to other loans, making it easier for all veterans and their families to qualify.
6. Lower Closing Costs
The VA limits the closing costs lenders can charge, which can save you money.
7. Flexible Funding Fees
The upfront fee for VA loans can be included in the loan itself, and some borrowers may even be exempt from paying it.
8. Assumable Loans
You can transfer your VA loan to another eligible buyer, which can be beneficial if you sell your home in the future, especially if interest rates rise.
Using VA Loans to Buy Foreclosed Homes: How Does it Work?
With a VA loan, you can finance the purchase of a foreclosed home, as long as it meets certain guidelines. They’re meant to safeguard the interests of all parties involved in the home-buying process– you as the borrower, your lender, and the VA.
Let’s have a detailed look at the requirements you need to meet to get your VA loan approved.
Minimum Property Requirements for VA Loan Approval
These rules are like a VA loan checklist to make sure homes are safe and in good condition before veterans and their families can get a loan to buy them.
If you’re aiming for a straight approval, ensure that you meet these requirements.
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➙ Your property must be used for residential purposes, and not commercial uses.
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➙ The roof is perfect without any leaks that could cause damage or let water inside the house.
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➙ The HVAC and plumbing are in good working condition.
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➙ Any damaged windows are repaired and replaced.
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➙ Peeling paint that might contain lead is removed and repainted properly.
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➙ The entire home space is big enough and comfortable for everyone.
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➙ Your property is free from harmful pests, termites or fungus.
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➙ There’s a system in place to safely get rid of waste and sewage without causing any health hazards or contamination.
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➙ The property is accessible by public and private roads that are suitable for travel in all types of weather.
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➙ Attics and crawl spaces are easy to get to and have proper ventilation.
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Some may find these requirements overwhelming, but we need to trust the VA. They have established this set of rules to ensure that you are not only moving into a beautiful home on the outside but also a safe and healthy environment indoors, ensuring a high-quality lifestyle.
5 Tips to Overcome Challenges and Maximize Opportunities
While a foreclosed home is an affordable and appealing choice, there are a few challenges that might come your way, and you need to watch out for them so that you can make use of the opportunity to the fullest.
1. Understand The "As-Is" Nature
Foreclosed homes are typically sold "as is," meaning the seller is not responsible for repairing any issues discovered after the sale. Take this into account when assessing the overall value and feasibility of the purchase.
2. Get A Professional Inspection
Before purchasing a foreclosed property, enlist the services of a qualified home inspector. A thorough inspection can uncover hidden issues and help you understand the true condition of the home. This knowledge empowers you to make informed decisions and negotiate effectively with the seller.
3. Negotiate Wisely
Use the information gathered from inspections and assessments to negotiate effectively with the seller. Consider factors such as the property's condition, market value, and repair costs when submitting offers and negotiating terms.
4. Factor In Additional Costs
Be prepared for additional costs associated with buying a foreclosed home, such as property taxes, homeowner's insurance, and potential legal fees. Budget accordingly to avoid financial strain down the road.
5. Evaluate The Long-Term Potential
Lastly, consider the long-term potential of the foreclosed property beyond its current condition. With strategic planning and investment, a foreclosed home can not only be transformed into a comfortable living space but also serve as a valuable asset in your financial portfolio.
Success Story of Veteran Brian Davis
Meet Brian Davis, a determined veteran on a mission to find his family's dream home. Brian initially set his sights on purchasing a foreclosed property. However, his journey took an unexpected turn when he discovered that the property he had selected didn't meet the strict requirements set forth by the VA.
But, he didn’t settle! For 15 days, he searched neighborhoods, attended open houses, and went through listings, determined to find the perfect home that met both his family's needs and the VA's standards.
Finally, after weeks of diligent searching, Brian spotted a property that checked all the boxes. Excited but cautious, he wasted no time in scheduling a comprehensive inspection to ensure there were no hidden surprises.
And, there were a few issues, but he used it to negotiate for a much lower price because these damages can be fixed. To his delight, the seller agreed to the revised terms, and Brian's dream of homeownership is just a few days away and I must say his kids are beyond excited!
Go Ahead & Start Your VA Application!
Just like our fellow Veteran Brian Davis, buying a foreclosed home is just within our reach. But, make sure you’re well prepared to face the challenges that come your way.
Know the requirements that you are supposed to meet, and make sure the property you’ve selected checks all the boxes.
By understanding the process, conducting thorough research, and seeking guidance when needed, I am sure you will achieve homeownership in 2024. So, seize the opportunity and start your VA application today.
About the writer
Stephanie Trudeau
Reverse Mortgage
Expert