Can You Buy A Foreclosure With A VA Loan?

Yes, in some cases, you can buy a foreclosure with a VA loan.

Like any type of mortgage, VA home loans sometimes go into default. When that happens and the home goes through foreclosure, the Department of Veterans Affairs pays the lender the guaranteed portion of the loan.

After the foreclosure process is complete, the property becomes owned by the VA. These homes are known as Real Estate Owned (REO) properties.

The VA doesn’t hold onto these homes long. Instead, they are listed for sale — often through the VA Vendee Loan program, which offers special financing options for buyers.

And yes, eligible borrowers can sometimes use a traditional VA loan to purchase these properties — as long as the home meets VA property requirements.

Let’s break down how it works.

Who Is Eligible To Purchase A VA REO Home?

The VA REO program is not limited to those who qualify for the VA home loan benefit. Nor is the program restricted to owner-occupiers. The list of those who may apply to purchase a VA REO home includes:

• Veterans
• Non-Veterans
• Owner-Occupiers
• Investors

What makes the VA Vendee Loan Program unique among mortgage loan options is that it offers buyers of these VA-repossessed homes, “a unique seller financing loan product that is competitive and affordable,” and Vendee financing is described as “a viable alternative” to traditional mortgage financing.

Where To Find VA REO Homes

Unlike shopping for a typical suburban home, condo unit, mobile home, townhouse, or other property types, VA REO homes are not necessarily available in all housing markets. You can search for VA REO properties near you or elsewhere by looking at the official site, which features listings for REO homes currently for sale. The link takes you to VRM Properties, not the Department of Veterans Affairs.

Using A VA Mortgage To Purchase A Foreclosure

You can use a VA loan to purchase a VA-owned foreclosure — but there’s one important requirement:

The home must meet VA Minimum Property Requirements (MPRs), meaning it must be considered move-in ready.

If the property needs significant repairs or doesn’t meet VA standards, you may not be able to use a traditional VA loan to buy it.

What About Vendee Financing?

Some VA REO properties are eligible for Vendee financing, offered through VRM Mortgage Services in partnership with the VA.

While Vendee loans are not traditional VA loans, they often include similar features, such as:

• Little to no money down
• 15- or 30-year loan terms
• Competitive interest rates
• No private mortgage insurance (PMI)
• No prepayment penalties
• Possible seller contributions toward closing costs

Some borrowers may also be able to finance certain fees into the loan.

Unlike VA loans, Vendee financing may not require an appraisal.

Important: REO Homes Are Sold “As-Is”

VA-owned foreclosure properties are typically sold as-is. That means:

• The VA does not guarantee the condition of the home
• Repairs may be needed after purchase

Before making an offer, carefully review the property’s condition and determine whether it qualifies for VA financing.