The VA has one of the lowest default rates, but that doesn’t mean no one defaults on their loan. Every now and then someone defaults and the home goes to auction. This means the home is offered to anyone that attends the proceedings. It goes to the highest bidder. What if that bidder has VA financing? Can they still buy the home?
Read on to see how the process works.
Buying a Home at Auction
The first step for most foreclosed homes is for it to go to auction. This means the county sheriff auctions the home off to the highest bidder. There’s a catch, though. In most cases, the highest bidder must come up with the cash within 48 hours. This is not a possibility with VA financing.
The most common buyer of an auctioned home is a cash buyer. They have the money in their hands already. Any loan program will require time for the appraisal and processing of the loan. The only exception to the rule would be a home equity line of credit or a cash out loan. If you have equity in your current home that you can tap into, you may be able to close on the loan before you even bid on the auction home.
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Waiting for the Next Step
Not every home is sold at auction, though. Either there aren’t enough bidders or the bidder couldn’t come up with the money. In this case, the home then goes to the lender. The lender usually enlists the help of a real estate agent to sell it. This is when you can use your VA loan to buy the home.
Once the real estate agent lists the home for sale, you can put a bid in on it. If the seller agrees to your price, you can start the VA loan process. This includes ordering an appraisal. The largest stipulation of the sale would be the condition of the property. Most foreclosed homes come “as is.” The VA doesn’t allow that though, unless all Minimum Property Requirements are met.
Going Through the Appraisal for the VA Loan
Now that you have the contract, you wait for the appraisal. Basically, the appraiser must make sure the home is safe and sanitary. He also must make sure the home is structurally sound. The VA isn’t looking for perfection.
What they do look for is things like termite damage, mold, or damaged roofs. Anything unsightly that also poses a danger to the home’s residents could pose a problem. This doesn’t mean the home must be in good or even pretty condition. There could be many cosmetic issues. As long as there aren’t any threats to anyone’s wellbeing, it may pass the appraisal.
A Home on the Market Gives you More Time
VA loans aren’t the speediest to get closed, but they don’t take forever. Usually lenders give buyers 30 days to secure their financing and close on the loan. If you have all of your ducks in a row prior to bidding n the home, you should be in good shape.
This means getting the lender to go over all of your documents. This includes your income documents, asset statements, and your credit report. This way the only outstanding condition is the home’s appraisal. Once the lender has the appraisal and approves it, you can close on the loan.
This is the easiest way to use a VA loan to buy a foreclosed home. While you might not get first dibs at auction, you can bid on it as soon as it’s on the market.
