Frequently Asked Questions
Closing Questions
Owner’s title insurance is a policy that protects the homeowner from any claim against the home before the borrower purchased the property. A title company will perform a search of title on the property to ensure there are no claims against the property. While the Vendee™ loan program does not require an owner’s or lender’s policy as a condition of lending, borrowers are advised that acquiring an owner’s title policy is a wise decision and should strongly be considered for their purchase transaction.
Aside from the Vendee™ lending fees, there are usual and customary closing costs that a borrower could expect to see as borrower expenses. These may include but are not limited to: Title Insurance, Title Search, Title Committment, Attorneys Fees, Escrow or Settlement Fees, Wire Fees, Courier Fees, First 12 month premium of homeowner insurance, impounds or initial starting escrow amounts for taxes and homeowner insurance, HOA transfer or documentation costs, prorations, survey, home warranty, credit report, borrower validation or verification costs, flood or tax certificates, inspection costs, etc. Most of these expenses are not lender related expenses but are the expenses
No. The vendee loan program does not allow borrowers to have power of attorney or proxy for legal documents. The program does allow for remote signing capabilities for those borrowers that can not be physically present for signing.
As with most real estate transactions, the keys cannot be released to the new purchaser until the loan and settlement escrow has been disbursed. Your settlement agency will be given authorization to disburse the settlement. After this disbursement is completed, the transaction is finalized and keys can be released to the new owner.
No. Until the transaction is complete, the borrower must not move any items into the dwelling or on the land. Additionally the borrower shall not make any alterations to the property on any vistations or showings until the transaction is complete.
Borrowers choose the settlement company to handle their transaction. While Vendee™ does not have a lending requirement for an owner’s policy, your settlement company may not handle your transaction without underwriting a policy. Borrowers and their agents should speak directly to their settlement company about what will be required costs associated with handling their transaction.
It is possible to have the seller contribute towards allowable closing costs. These are negotiated within the offer process. Seller contribution towards borrower closing costs can only be applied on allowable costs that are defined within the program. The contribution cannot be applied towards any lending fees, costs paid in advance of closing or non-allowables such as appraisals, tax certificates, impounds, etc. Talk to your loan officer for the allowable and non-allowable closing costs that can be covered by seller concessions.
Borrowers may finance their funding and origination fees but may not finance any other closing costs or lending processing fees.
Eligibility Questions
Property eligibility is determined on a case-by-case basis. Each property must be safe, sound, and secure. The https://listings.vrmco.com site will show a program logo stating “This property qualifies for seller financing”. You can also set search parameters to only search Vendee™-eligible properties.
Vendee™ loans are available for Veterans, non-Veterans, and investors who are purchasing eligible VA-owned properties.
Credit overlays, debt-to-income ratios, and other factors are used to determine if a borrower is credit worthy. Investors have the added requirement of proof that they have previously managed properties
A REO property must meet three conditions (3) to be eligible for Vendee™. 1) Environmental – The property must be free of any hazards or environmental concerns, safe & sound and meet minimum habitability standards.; 2) Title Approval – The transfer of the title from the prior owner to the Secretary of Veterans Affairs must be free of any issues thus allowing the VA to transfer again to the new buyer without issue.; 3) The value of the property in conjunction with the fees of the Vendee™ loan program cannot constitute a high cost mortgage.
These conditions must always be met to allow a property to be eligible for Vendee™. These conditions are also subject to change at any time. For example: A property can be impacted by a local disaster and have sustained damages that no longer make the property safe & sound. This can invalidate the property for Vendee™ while still making it available for sale. All borrowers must sign a financing notice to advise of these conditions and that their Vendee™ loan is subject to the eligibility of the property. Should the property become ineligible prior to closing on the property, a Vendee™ loan can no longer be used to purchase the property and borrowers must seek alternative financing or terminate the purchase agreement.
Investors must have previous experience managing rental properties to offset the payment on the subject property. First-time investors are not eligible for Vendee™ Loans.
Guidelines
You can finance 100% of your loan, but that does not include closing costs. Borrowers will likely need to bring money to the closing table. 5% down payment is required by VA for investors. IF the purchase price exceeds the value of the property, borrowers may need to put down more money to qualify.
No. Like most loan products, your overall credit worthiness will be analyzed using debt to income ratios, credit report, etc.
Preapproval or prequalification is not required within this program. Borrowers may submit an offer for a VA REO property without having first been prequalified or preapproved.
Vendee™ is a fixed rate loan program that is offered in both 15 and 30 year terms. The interest rate is typically below the prime and subprime rates. Contact a Vendee™ loan officer for current interest rate in the program.
Most loan programs allow borrowers to “buy down” the interest rate. The Vendee™ program is a fixed rate program and does not have buy-down options. All borrowers have the same interest rate based on the locked rate at the time of their loan.
Prequalification is a process in which a potential borrower can determine how much of a loan they qualify to obtain. Borrowers need not have a property in mind to begin the prequalification process. To begin the process, a borrower would reach out to a Vendee™ Loan Officer and start a prequalification application. Minimum information may be required of the borrower to obtain some credit inquiry. Borrowers that obtain approval will be given a prequalification notice along with the maximum loan amount they qualify to obtain. Borrowers should note that prequalification is not the same as loan approval. Loan approval can only be obtained with an actual property and a full review of the borrower’s credit, income, assets and liabilities. Borrowers should remember that the prequalification loan amount is not the same as the suggested purchase price NOR should it be perceived as the full amount that can be borrowed in a Vendee™ loan.
Sometimes a borrower is approved for a particular financing amount but when HOA dues, etc. become excessive, they may no longer meet our guidelines to purchase. Example would be a pre-approval for $475,000 and a condo purchase of $470,000. If the condo HOAs cause the borrower’s debt-to-income ratio to be too high, they then are denied the loan, despite the pre-approval.
No. As a part of the program, the buyer must not transfer any responsibility of the transaction to an intermediary, proxy or other entity.
These are referred to as “fix and flip” real estate. The Vendee™ program supports neighborhood stabilization and investors should look to the program only for properties they wish to maintain as rentals. The Vendee™ program does not allow investors to purchase REO properties under this loan program as rehabilitation for the purpose of resale.
While Vendee™ is open to any kind of borrower, borrowers must use personal credit for eligibility. This requires that the borrower is identified in name and title must coincide with the same name(s) that are on the mortgage note. The Vendee™ loan program will not permit a loan or title in the name of a business.
There are many guidelines for investors that your lending team will look at to determine eligibility, however an investor must be able to show some experience in managing rental properties or have properties that they are currently renting. This guidelines looks to ensure that investors understand the responsiblities for maintaining the value of properties and reduce the risk of the loan by showing rental income can offset the mortgage and ownership responsibilities for the loan.
Borrowers must escrow homeowners, flood (if applicable), wind/hail (if applicable) and all property tax obligations. Your servicer will collect the monthly amount of these obligations and pay them on your behalf when they become due. At your initial settlement, borrowers will have a starting escrow amount based upon the next disbursement date of these obligations to ensure your initial escrow balance plus any future payments will be adequate to make the payments at the next disbursement. Borrowers will typically have to pay the first year premium for insurance(s) at settlement.
Maybe. Generally speaking an appraisal is not required, however an appraisal may be required in the event that the borrower is seeking to obtain financing higher than the value of the property. If an appraisal value is less than the amount of the loan the borrower will be required to reduce the loan amount not to exceed the value of their lending terms.
There are only two lending fees associated with the Vendee™ loan. The first fee is an origination fee. This fee is for the service to underwrite your loan. The second fee is called a funding fee. This fee is typical for all VA loans. The funding fee may be waived in circumstances where the borrower is a veteran or surviving dependent of a veteran that is receiving disability benefits. Your loan officer will obtain a certificate of eligibility from the Department of Veterans Affairs to determine if your funding fee may be waived. The program does not allow for a waiving of the origination fee regardless of veteran status.
Sometimes. The vendee loan program does not require a survey to complete the transaction, however the borrower’s title company, homeowner insurance provider or even the State statutes may require a survey on real estate transactions. When a borrower must obtain a survey then one or more of these organizations are requiring a survey to complete the transaction.
Sometimes. If the borrower is purchasing as an owner-occupant then occupancy will be required for the Vendee™ loan. Your loan officer and underwriter will look to occupancy guidelines to ensure the borrower intends to occupy the home. If the purchase is as an investment, the borrower does not need to occupy the home however rental expectations are placed on the property.
A borrower wishing to purchase a VA REO as a second or vacation home will be treated as an investor and all investor guidelines will apply to the underwriting of the loan.
No. Second liens or mortgages are not allowed within the program.
Possibly. The terms of the Homeowner Assistance Program will be evaluated by Vendee™ Program Director to ensure that no stipulations of the program would invalidate the Vendee™ loan guidelines as defined by the Department of Veterans Affairs. Borrowers wishing to use a HAP program should inform their loan officer during the loan process so the program can be evaluated in conjunction with a Vendee™ loan.
Your loan officer will lock a rate once you have been given a lending estimate. This rate lock is crucial to ensure that your rate cannot change if the interest rate increases. Alternatively, if the interest rate decreases and you have a locked rate you will be able to reduce your interest rate the lower amount.
Sometimes. As an owner-occupant you can only have one active Vendee™ loan at a time. Investors do not have a limit on the number of Vendee™ loans they can obtain provided they continue to qualify and are in good standing on other Vendee™ loans.
Offer Questions
VA REO properties are valued and marketed for quick sale and do not have special discounts for different buyers. All buyers and their respective offers are treated the same.
Buyers are encouraged to have a licensed real estate expert represent them in all real estate transactions. Buyers and their agents should contact the listing agent for the VA REO and work with them on submitting an offer. VA REO properties are highly sought after and often there is competition for the property. When this situation exists, a “highest and best” period will begin to allow all interested parties to submit their highest and best offer for final consideration by the seller.
All VA REO properties are sold as-is. While there are some properties that may need repairs or if the buyer would like to make some changes in conjunction with the property, the Vendee™ loan does not allow the borrower to secure more than the loan-to-value allowable for the type of borrower.
Possibly. Tenants must first follow the tenant purchase guidelines of the REO program. Your rental specialist will reach out to the Vendee™ Program Director to determine if the subject property may be eligible for Vendee™. If the property can be eligible for Vendee™, your rental specialist will provide a direct link for tenants to prequalify under the program and submit this prequalification notice in conjunction with an offer.
Process Questions
Often borrowers receive a conditional approval. These conditions must be cleared before your loan can be finalized and move towards closing. Borrowers are encouraged to be responsive to the requests made by their lending team to ensure no further delays in the loan process.
We understand that the loan process can be overwhelming. Your lending team is there to guide you through the loan process. Borrowers are encourage to look at the “First Time Home Buyer” section of this site for helpful information on the process and what you can do to prepare yourself for homeownership.
Program Questions
No. The VA Guaranty loan is a benefit to veterans. The Vendee™ Loan is available to veterans and non-veteran equally. The guidelines and terms of a Vendee™ loan are different than a guaranty loan. Veteran purchasers should consider which loan program best suits their needs for the type of property they are trying to secure.
Borrowers must ensure that there is adequate hazard insurance to cover the value of the property for replacement. In instances in which the property has additional or special hazards (wind/hail or flood zone), additional coverage will be required of the borrower to cover hazards that are not part of a standard homeowner insurance policy. Investors will be required to obtain Landlord level insurance coverages instead of owner-occupant level coverages as they are not expected to occupy. Your lending team will advise on the amount of coverage that is needed for the loan.
Servicing Questions
Within your final mortgage package there will be a notice of servicing transfer. This notice provides the name of the organization that will be servicing your loan as well as the customer service contacts. This organization will also reach out to all borrowers within 15-21 days of closing with a welcome package and work with you to arrange automated payments for your convenience.
No. The Vendee™ loan product is for purchase only and can only be used in conjunction with a VA Real Estate Owned (REO) property that is eligible for the program.
As a part of the program, a borrower may have another person assume the responsibility of the loan. Assumability can be used in situations where the borrower(s) are not able to continue with the loan but are not selling the property. These situations are most common when one or more borrowers are deceased or financial incapable of making reliable mortgage payments. In these cases, the new borrower must qualify for the loan and approval must be granted by the Department of Veterans Affairs to change the title and mortgage docs for any loan that is assumed. There are fees associated with the assumability process and borrowers should look to their assumability notice for all applicable fees for this.
No. Vendee loan and mortgage documents require that any and all names on Title and Deed must be the same names as those with a financial responsibility for the loan. An acceleration clause within the mortgage would allow the VA to demand the note to be paid in full should any transfer or assumability of ownership of the property be made without express written approval of the Department of Veterans Affairs.
