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Sometimes we come across the term VA foreclosure and, though the property sounds enticing, we are not entirely sure what that means. VA stands for Veterans Administration and it has to do with the home loan that a military veteran has made possible to him by the Federal Government who acts as a guarantor for the loan.Ideally, a Veterans Administration foreclosure property is a home that was bought by someone with a Veteran’s Home Loan. This means two things to the potential foreclosure purchaser. It means that the home was bought and owned by an ex-military person and that the property purchase was backed by the Federal Government.
A Veteran Home Loan is somewhat different from that which is available to most other individuals. Like with a normal loan, a lender is approached and asked for a loan with which the prospective property will be bought. Unlike a normal loan, that loan repayment will be guaranteed by the Department of Veterans Affairs. This government department will promise to repay the Lender any money which is lost should the veteran fail to make regular payments resulting in the property’s foreclosure.
Veteran Home Loan applications therefore have a very high acceptance rate as the Lender is fully guaranteed against his investment. No matter what happens, he will not loose money. This means that even if the veteran does not have a lot of money or a good potential income, he will still be able to get a home loan and buy himself a house.
But what if the veteran does defect on his payments and he is unable to stop foreclosure? Surely that puts the Federal Government at risk to loose a lot of money? Well, the Federal Government does take steps to protect itself. It charges all veterans who make use of VA mortgages a funding fee. This fee is a percentage of the total mortgage amount and it ensures that the Federal Government is not left out on the deal.
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