Vendee Financing: What is it, Qualifications, How to Get, and More

Both veterans and non-veterans can purchase a foreclosed Veterans Affairs Real Estate Owned property if a third group does not buy the home at the foreclosure sale. In addition, the possession of the VA home by veterans or non-veterans can be financed via vendee financing, categorically known as the VA Loan/Finance Program.

Vendee Financing: A General Overview

Have you ever thought about what happens to the borrowers who stop paying their VA loans? Similar to the case of any other mortgage levant, non-payment of VA loans starts with the foreclosure process. The VA then put these foreclosure homes for sale through its VA vendee financing, which is a great opportunity open to veterans and non-veterans looking to buy a new home.

The simple meaning of vendor finance is a financing system where a person can not get bank loans but wants immediate emergency funding to start any of their projects. The users will get multiple financing options, and buyers will get the products within the price range that they are looking for.

But, before learning about how to get vendee financing done, we must know what the Vendee Loan Program is and how it works.

What Is Vendee Financing or VA Vendee Loan Program?

According to the Veteran’s Affairs website,

“The VA Vendee Loan Program offers qualified borrowers the option of purchasing VA Real Estate Owned (REO) properties with little to no money down. The program is available to Veterans, non-Veterans, owner-occupants, and investors. The VA Vendee Loan Program offers buyers of VA REO properties a unique seller financing loan product that is competitive and affordable.” 

Vendee Financing is also called the VA Vendee Loan Program. It is a loan arrangement that allows qualified borrowers to purchase and take possession of VA REO properties. The best part of this financing method is that you can own the property with little to no money down payment. Apart from veterans and non-veterans, investors and owner-occupants are also allowed to buy VA REO homes. 

Vendee financing is a competitive and affordable loan option that makes it a different seller that provides loan products for buyers of VA REO properties.. A Vendee is a feasible substitute for traditional financing. Let us go through some quick facts about vendee financing before learning about the loan application process.

Vendee-finding loans are one of the most powerful mortgage options on the market. Veterans and military service-taking spouses have the maximum benefits from this program.No mortgage insurance is required for the purchase.Interest rates are also very low.

Quick Facts About VA Vendee Financing

1. VA Vendee Loan Program is open for veterans, investors, non-veterans, and owner-occupants.
2. This seller financing vendee option attracts little to no money down payment.
3. Loan providers may add the originating and funding fees to the loan. The VA charges a 2.25% funding fee for all the VA Vendee loans they approve.
4. The loan offers either either 15-year or 30-year term options.
5. This loan option comes with a competitive interest rate.
6. As an additional benefit, the seller may make a monetary contribution towards the closing cost by the seller. 
7. There is no requirement for an appraisal.
8. There are no prepayment penalties applicable under vendee financing.
9. Lacks the need for mortgage insurance.

Whom To Contact For A VA Vendee Financing?

The VA Vendee Loan Program is almost similar to the VA loans but has two significant changes. First, the lenders can issue the vendee loan to any qualified borrower. Secondly, investors who receive the vendee loan can use it to buy rental properties. The VA also stands as a guarantor for its vendee loans, just like its standard home loans or VA loans.

Due to the rise of the VA REO portfolio, the Department of Veterans Affairs decided to outsource the management and sale of the VA REO properties on a contractual basis. Vendor Resource Management (VRM) holds the current contract, whose landing arm, named VRM Lending, is the concerned department for issuing all the loans via its vendee financing or VA Vendee Loan Program.

What are the Major Vendee Financing Qualifications?

The following are some of the major aspects that you need to know about Vendee financing: 

Vendee Financing Eligibility

All Vendee loans are available to US Veterans who are purchasing VA-owned properties. However, these financing are also available to non-veterans and investors who are purchasing eligible VA-owned properties.  

What is the Eligibility of a Borrower?

The eligibility of a borrower depends on a lot of factors like credit overlays, debt-to-income ratios, etc. These factors help to determine whether a borrower is credit-worthy or not. 

Vendee Financing Eligibility for Investors

The eligibility of an investor also depends on a variety of factors like credit overlays, debt-to-income ratios, etc. Apart from that, investors also need to show previous experience in managing a rental property. If an investor is managing properties for the first time, then the investor is not eligible. 

A Property’s Eligibility for a Vendee Loan

The eligibility of a property for a Vendee loan depends on a case-by-case basis. Basically, it is important for a property to be safe and sound. Here, to learn more about a property, you will need to go to the listings website. If a property qualifies for financing, there shall be a program logo that states, “This property qualifies for seller financing.” Furthermore, it is also possible for you to set search parameters to Vendee-eligible properties.

Steps To Getting Vendee Financing

This is a unique loan program that is followed with complicated documentation. To ensure you breeze through the process, we have enumerated the financing process in a step-by-step format.

Step 1 – Get yourself pre-screened with VRM Lending:

The first step toward the VA Vendee Loan is to see whether you are qualifying to get vendee financing or not by getting yourself pre-qualified with VRM Lending. To do this,, you need to contact a VRM loan officer and discuss your overall financial picture with him. Post this. The underwriters will analyze and evaluate each file individually to reach a firm conclusion.        

Step 2 – Look for VA REO properties that you are eligible for:

If you are approved as a qualified borrower for vendee financing by VRM Lending, therefore your next step should be to find a VA REO home. The local agents of the VA REO properties list all the homes that are up for sale through the Multiple Listing Service (MLS). However, you can directly contact VRM when searching for homes.   

Step 3 – Submit your application for Vendee Financing:

You can make an official application for the vendee seller financing program when you have found an appropriate VA RO property for your purpose.

This official application includes-

1. Social Security number verification.
2. Income verification.
3. Property information, i.e., address and desired loan amount.
4. Credit Check authorization. 

After submitting all the above credentials correctly, the loan officer at VRM will run a credit check and send the first disclosure to you. This is the only point where you get to decide for the last time whether you want to proceed with the loan or not.  

Step 4 – Processing of the Land and Underwriting:

If you choose to proceed with vendee financing, hence your dedicated loan officer at VRM will inform an underwriter to forward your credit details and forward your credit details and complete the mortgage package to him. This underwriter will go through the entire package to check whether or not the package meets the standard lending requirements. 

Step 5 – Signing the Closing Disclosure and Closing the Loan:

The last step constitutes sending a closing disclosure (CD), which VRM will ship once the underwriter conditionally approves your vendee financing application. The CD comprises all the loan details that have to be received and reviewed at least three days before closing.Once you have acknowledged the receipt of the CD, you shall sign all the closing documents. After that, the lender will arrange to release the funds to buy the VA REO home.

Some Essential Aspects of Vendee Financing

The following are some of the major aspects of Vendee financing that you need to understand:

100% Vendee Financing

It is possible to finance 100% of your loan. However, this amount does not include the closing costs of the loan. Hence, as a borrower of the loan, you will need to pay money during the closing process. Furthermore, if the purchase price of the loan exceeds the property value, qualification will need a higher payment.

No Requirement for a Minimum Credit Score

To become eligible for a Vendee loan program, you will not need to have a minimum credit score. However, your credit score is important, as the loan providers will analyze it using the debt-to-income ratio, credit report, etc.

No Requirement for a Pre-Approval

To avail of a loan, you will not need a prequalification or a pre-approval. Furthermore, a borrower can also consider submitting an offer for a VA REO property, even without prequalification or pre-approval.

You Can Not Buy Down a Lower Interest Rate

The Vendee financing program comes with a fixed rate program. Hence, it does not have a buy-down option. Here, all the borrowers of the loan have the same rate of interest, which depends on the rate they get at the time of the loan.

Concluding Words

Vendee financing, or the VA Vendee Loan program, is an excellent opportunity for all those looking to buy a new house simply because of the benefits it provides to the loan receiver compared to any traditional housing loan. Furthermore, Investors opting for this loan have to pay 5% as a down payment along with property management experience.

The sellers can contribute up to 6% of the total sales price towards the closing cost. All the VA REO properties are sold “AS IS” at or below the fair market value, among many more. So, what’s stopping you from applying?

Frequently Asked Question!!! (FAQs):

Vendee financing is a unique entity that raises several questions in the minds of people. We have curated those questions and have tried to answer them all.

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