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Can a Veteran use the VA home loan benefit to buy a foreclosure home?

Can a Veteran use a VA Loan to Buy a Foreclosure Home?

This is a really good question that I got from a veteran here in California. Emmett asks me: can a veteran buy a foreclosure or a pre-foreclosure home? 

The question is actually about how the previous owner lost the home.

Now a foreclosure obviously would be a home that the previous owner defaulted on, potentially the bank owns it or an investor potentially owns it now. That makes no difference with a VA loan.

Now, what you may run into … And this was very, very common quite a few years ago. I don’t see this as often. But back when the mortgage industry collapsed about 10 years ago, 2007, 2008, 2009, that area, there were a lot of foreclosures.

What would happen is these foreclosures, the banks would take the foreclosures, they’d put them back on market, and they would have a special addendum to the purchase contract that said that the property was sold as is and they would not put any work into it. They wouldn’t put any upgrades, they wouldn’t do any repairs.

They had never lived in the home because obviously, they were the bank that foreclosed, and they weren’t really interested in throwing good money after bad. They were already in a situation where the owner defaulted, and they were just trying to get their money back.

That might be a situation that you would be concerned about, like if the bank owns it and they say, “We’re not going to do any repair.” VA loans do require that you have a termite inspection or a pest inspection. That’s a requirement of VA.

They’re also going to make sure that there are no health or safety issues with the property. There can’t be broken windows or holes in the wall or exposed wiring or anything like that.

But that’s not really unique to VA loans. That’s going to be the same whether it’s conventional or an FHA loan or any other type of loan, so the fact that it’s a foreclosure.

Now a pre-foreclosure could be a short sale. Short sale, again not a problem. The only difference is who owns the home. On a foreclosure, maybe the bank owns the home. On a pre-foreclosure, it could mean that the home is in default and the owner’s still there.

Even though the loan is in default and it could be foreclosed, they could be going through the short sale process. They could be trying to get a loan modification or a deed in lieu of foreclosure. They could be doing almost anything.

Again, as long as the property is safe, there are no health or safety concerns, you can absolutely use a VA loan to buy a home that was lost by a deed in lieu of foreclosure, short sale, or a foreclosure. None of these things is an issue.

There are no restrictions on VA loans on what type of property you can buy as long as the property is in good condition and you’re going to be safe and there’s no health problems, mold, things like that in the property.

Yes, you can absolutely buy a foreclosure or a pre-foreclosure. There are no restrictions on VA loans on what type of property you can buy as long as the property meets VA guidelines. I hope this was helpful. Thank you for your question and thank you for your service.

About the Author

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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  • Jerald fisher says:

    If you don’t use all your Va loan amount do you get the difference?

    • Scott Schang says:

      This is a really good question, Jerald. You do not “get” the difference as cash or credit, but it is available for future use. An example of this might be if you decide to convert your primary home with a VA loan into a rental in the future, you could use the difference in your VA Guarantee to purchase a new primary residence.

      THANK YOU for your Service! I hope this helps?