For many years, VA loans have been used by numerous military personnel past and present to obtain home ownership. Considered to be one of the U.S. government’s most successful ventures, the VA loan program has allowed many people to obtain homes for pennies on the dollars via short sale. In today’s real estate market, VA loans and short sales go hand-in-hand, although the procedure can offer both advantages and disadvantages.
Why Use a VA Loan?
In addition to allowing military personnel the opportunity to experience home ownership, a VA loan has a number of other advantages. When purchasing a short sale home, those advantages can include:
- Zero cash down on some home purchases
- Low interest rates
- Up to six percent of closing costs paid by seller
- No penalties for early or pre-payments
- No monthly mortgage insurance premiums
In addition to these advantages, no further credit underwriting is needed by the VA when it comes to VA loans and short sales.
Hurry Up and Wait
While there are many advantages when it comes to VA loans and short sales, there are some disadvantages as well. Perhaps the biggest is the gap between the time an offer is made on the property and when the seller chooses to reply with an acceptance or counteroffer. In some cases, the potential buyer can wait 60 days or longer, during which time interest rates can possibly go up. In addition, the VA will not guarantee a property unless its living conditions are safe for occupancy and the sale price is justified.
Just like purchasing a used car or other big-ticket item, many homes purchased through VA loans and short sales carry a large amount of risk with them. Most homes that are close to going into foreclosure and wind up as short sales are sold “As Is” to the buyer, which can be both a blessing and a curse. While the price may be bargain-basement, the repairs needed to bring the house back to respectability may be substantial. In fact, some short sale homes are purchased sight unseen, which can be an extremely risky venture. To be safe when it comes to combining these loans and short sales, an inspection of the property should be done prior to any purchase being final.
The Perfect Combination
While there are always risks involved when purchasing real estate, those buyers who combine VA loans and short sales often have much success. The ability to purchase a home at a much lower price than market value, along with needing little if any money down makes the process well worth the time and effort it takes.