VA "Vendee" Financing - Good?

Question

I'm curious to see who here has purchased an investment VA property using "vendee" financing.  Please describe the process, whether it was as straightforward as it seems, and what your associated costs were.  Also, would you do it again?

There have recently been a bunch of new VA listings pop up in my market that offer the "5% down" option for investors.  Since 5% down deals are otherwise unavailable for the most part, this appears to be an attractive method to acquire rentals, and I would liike to hear the pros/cons from those experienced in using this type of financing for deals...

Robert Steele · Answer

Are you kidding? this program is awesome for investors!!

5% down, and a 4.5% rate of the _entire_ 95% of the balance!,  no PMI either folks, cha ching! Up to 6% towards closing costs. No appraisal. No # mortgages limit. Seasoned investors can even use 75% of appraised rent for the property being bought towards calculating debt to income ratio. Still need convincing?

The VA fee is 2.25% which is 100% deductible in the first year as qualified mortgage insurance. It's basically prepaid PMI and because its VA its "qualified".

BoA charges a flat $2500 for closing costs and VA wont pay title policy so don't bother asking.

The quality of the properties seems to be much better than the average foreclosure in my area. I just closed on one with no deferred maintenance and got it rented in two weeks. I am closing on another this coming week that needs just a couple grand for cosmetics.

The closing process is a bit of a brow beating as far as documentation is concerned. I swear I thought they were going to ask for my first born too. But I guess that is par for the course now giving the new lending market risk aversion.

As another poster mentioned they are real miserly on coming down on the price. I've found that by being patient and waiting until the first price adjustment (usually around 3 weeks on market) then coming in 3-6% below usually seals the deal. Don't freak out if someone else beats you to it. About half the contracts these days are falling through so you'll probably get a second chance.

I have found that a property with these financing terms cashflows easily. I'll continue to snap them up as they come on the market :mrgreen:

Robert Steele · Answer

VA.REOTRANS.COM
va.equator.com

I have access to the MLS and just search for "veteran" in the seller name to match Department of Veteran Affairs. Another hint is if it is a foreclosure and you need a pre-approval letter from BoA.

VA Vendee Quick Facts:
â€¢ Any purchaser can apply for Vendee Financing. You do not have to be a Veteran.
â€¢ Vendee Financing is available for non-owner and
owner occupied.
â€¢ Low Interest Rates
â€¢ The seller may contribute up to 6% of the contract sale price for closing costs.
â€¢ 2.25% VA Funding Fee
â€¢ No pre-payment penalties.
â€¢ An appraisal is not required for underwriting.
Non-owner occupied only:
â€¢ No maximum number of investment properties.

Vendee financing is a loan product offered to individuals to help finance the purchase of VA REO Properties. Vendee Financing will be offered to both veterans and non-veterans. Some of the guidelines are listed below:
â€¢ Seller may contribute up to 6% of the contract sales price to pay
for funding fee, closing costs, prepaid and other expenses.
â€¢ Vendee mortgages are assumable by qualification.
â€¢ Vendee Financing is not a credit score driven product.
â€¢ There are two available terms, a 15 and 30 year fixed rate.
Owner Occupied purchase:
â€¢ Can be financed with as little as 0% down. The loan amount may be increased up to 2% to finance closing costs, prepaids or other expenses. Funding fee may not be financed.

Non-owner Occupied purchase:
â€¢ Can be financed with as little as 5% down. Investors may use 75% of anticipated rent based on appraiser's estimate to offset against the subject property monthly payment.
â€¢ Investors must have experience managing rental properties to include anticipated rent on subject property in underwriting.
â€¢ No maximum number of investment properties.

Marica Smythe · Answer

I have been using VA.Equator.com for what appear to be VA Vendee financed available properties. 
My agent said that of the 12 I am interested in only 2 are currently VA Vendee aproved. Excuse me, what?
I do not understand. 
He said the properties need proper title work and that the bank is doing this However, 20%+traditional financing down or cash would get these now and that VA Vendee would not be accepted. The bank was converting the title. I do not understand.

How can properties which appear on the site in which VA Vendee financing can be used then say that only specific properties are eligible?

I called on 3 other properties which are still showing as current on the Va.equator.com site but not on the MLS and I was told by three independent agents that "there is a title problem now and these properties have been off the market anywhere from 2-6 months." 
What gives?

Does a dedicated VA property site exist where I can be assured that properties I am interested in are 100% Vendee eligible?  I have wasted countless hrs. on research to be told some properties are not eligible.

Who can clear this up?

Michael Lauther · Answer

Thanks for the information, i logged onto their site and they have a huge inventory. 
do you know if they will sell to an IRA, i read earlier that they would not sell to an LLC. I assume the financing is not available as Non recourse to the IRA.

Robert Steele · Answer

So when I said 3-6% below asking price I ment net.

Claude Hodge · Answer

Robert, thank you very much!

Claude Hodge · Answer

Is there a site that you all go to to find these certain properties?  Is there some type of term that you see that tells you this can be bought with VA Vendee financing?

Claude

Dave Toelkes · Answer

When I did my VA vendee financing back in the day, the VA funding fee was 2.25 points which could not be financed with the loan.  For a $150K property, the funding fee could be twice to three times the other settlement and closing costs.
          
          There was a limit to the amount the loan could be increased to cover closing costs and prepaids.  I think it was 2%.
          
          There was no appraisal required to underwrite the loan which did help speed the process and contain the cost of settlement.
          
          The loan was not credit score driven AND there was no number of financed properties limit for investors using the vendee financing as a non-owner occupied loan.
          
          Bank of America has never been very friendly to me as an investor so I tend to go elsewhere when I need a loan.  
          
          I got my loans with a small corresponding broker/lender who sold the loans to Washington Mutual and Wells Fargo after settlement.
          
          Remember, this was back in 1998 and 2000 when I bought these VA REOs.  At the time, the loan processor had only two weeks to put together the underwriting package and submit it to VA for approval.  Since i already knew what the underwriter would want, I had a documentation package ready to submit to the underwriter the next day.  Perhaps this helped speed up the turnaround time to loan approval.
          
          Maybe things are different today.  I hope not.

Sylonda Davis · Answer

I closed on a Vendee prop as an investor about a month ago.  The process is a little more involved, meaning Bank of America asks for a little more extra information, however for the most part it was pretty smooth for me.  From start to finish it took 2 months.

I see in one of the replies that the closing costs were huge for him.  I asked them to cover closing costs in my contract and it was. As a truly novice investor, I like the program because it only allows me to put 5% down and there is currently no other institutions offering that (at least that I am aware of).  I did get my prop for 6K under asking and it was not in bad shape at all.  It was rented in 3 weeks.

A family member went through the same process and it was a little longer.  It depends on the loan officer, I believe.  I do agree with all of the comments of Dave T.  I believe to save some money, it may be worth a little time and patience to seek out this program.

I would definitely do it again!!!

Jeffrey K. · Answer

I am working one right now and it is a BITCH.  The closing costs are huge.  You need to buy it in your name then have it transfered to an LLC as they will not loan to an LLC.

I am dealing with Bank of America and they are not moving an inch on the price.  It has been on the market for 90+ days with no price reduction and they will not go less than 6k lower than asking on a 160k property.  I think they think that the loan makes the high price worth it?