The VA loan is widely used by active duty and veteran service members because it’s buyer-friendly, it requires no down payment or private mortgage insurance, and it offers favorable VA loan interest rates. It's a great benefit of military service, but did you know the VA also has another financing program for buyers who don’t qualify for the VA loan?
The VA Vendee Loan Program is an affordable loan product offered and guaranteed by the VA, but it’s available to military, non-military, and investors.
When the VA buys foreclosed homes from previous owners/lenders, it becomes a real estate owned (REO) property. VA Vendee Loans are available for the REO property inventory that the VA owns. It's a solid alternative to traditional loan financing.
The program gives home shoppers the opportunity to buy foreclosed homes that the VA owns. Financing is handled through VRM Lending. They work with the VA to resell the properties and originate the loans. If you’re a potential owner-occupant, you may qualify to finance up to 100% of the loan amount, but you’ll still be responsible for closing costs. Investors typically need to bring at least a 5% down payment to qualify.
In some cases, such as when the purchase price is less than the property’s value, you may be required to make a down payment. A VA loan closing calculator can be a useful tool for estimating how much you need to budget for.
The VA allows any qualified buyer the chance to purchase a listed home. Veterans and active-duty military are welcome to apply, as well as non-military buyers and investors, although investors follow a slightly different set of guidelines.
The VA Vendee Loan is an affordable option for buyers who might not qualify for other loans. Some of its perks are similar to the VA Loan.
Depending on the type of borrower you are, you might find a couple of downsides to the VA Vendee loan.
Owner-occupants on a tight budget may want to think twice about buying a home in its current condition. The VA requires properties to be “safe, sound, and secure,” but you’ll still want to budget for repairs. A home inspection before closing is allowed, so you’ll have a good idea of what work lies ahead if you move forward with the purchase. If the inspection reveals serious issues, however, you can choose to walk away.
Investors typically factor repairs into their budgets rather than allowing the results of the inspection to dissuade them from buying the property.
There aren’t many VA REO homes available at any given time. If you’re locked into a location like many owner-occupants are, your search could stretch for years. If you have the freedom to move or buy property as an investor, you’ll have more opportunities. The areas around military bases often have more inventory, but are also limited. However, a VA Vendee Loan could be worthwhile if your priority is favorable financing over a specific location.
Unlike the standard VA loan requirements, the Vendee program is open to investors. Take a look at some of the investor guidelines.
The VA doesn’t directly manage or sell REO properties. Instead, it contracts with Vendor Resource Management (VRM) and VRM Lending to handle listings and loan transactions.
Your VA Vendee Loan mortgage financing originates from VRM Lending, not the VA. You’ll work directly with VRM loan officers to apply and qualify.
Like other loans, you’ll pre-qualify with VRM Lending before starting the buying process. Loan officers review your finances, and underwriters confirm you meet the requirements. (Using a VA Loan calculator, such as those offered by Veterans United, can help you prepare.)
After you’ve chosen a property from the available inventory, you’ll submit an official application. Expect the usual documents: income verification, credit checks, property information, and Social Security number. If all goes well, your application goes through a final underwriting review.
Once you receive a closing disclosure, you’ll have three days to review the loan details. After signing, VRM releases the funds and you can close on your new home.
If you’re a first-time home buyer or need a refresh, read Most Common Documents Needed for Home Financing to learn about the documents loan officers require.
The VA Vendee Loan Program is an attractive option for those who may not qualify for a standard VA loan or for non-military buyers and investors looking for affordable terms. While similar to the VA loan, in that you can often avoid a down payment and finance most of the loan, the key difference is that the program is tied specifically to VA-owned REO homes and is available to a wider pool of buyers, including investors.
For more information about different ways to finance a home, see MilitaryByOwner's free guide below.