Posted by Mike on November 04, 1999 at 13:36:38:
Actually, VA loans are available to investors when you buy a VA foreclosure. I just bought two in the past 6 months. Also, I did it with “no money down” because VA has less stringent requirements and allowed me to use a credit card (not my money) to pay the down payment and closing costs. My rent covers the credit card debt and all other costs, leaving me with cash flow. By the way, a down payment on a VA foreclosure can range anywhere from 0% to 5% which is excellent for investors…and you don’t pay any PMI (private mortgage insurance) no matter what you get the house for. My latest VA foreclosure was 0% down. Figure on about 3-4% for closing costs regardless of the down payment. Both were bought at about 20% below market and are rented. Bottom line is that VA foreclosures are about the best deal you can make as an investor…and it’s very straightforward process. Buying from owners is good also, but more tricky. I’ve got two of those deals and each was very unique, but both “no money down” deals, where I acquired the properties for 20 below market value. One owner owned the property outright and financed 96% of the deal, but just for one year. I’m currently in the process of refinancing it to pay him. This type of transaction was extremely helpful because I didn’t have to put down 20% as I would have with a conventional mortgage. Since I have about 25% equity now, I put nothing down when refinancing, and that’s because banks treat purchases different than a refinance. With a purchase, a bank requires 20% down (conventional mortgage – and you avoid having to pay PMI) even if you bought it at 20% below market. With a refinance, the bank looks at the loan to value. If you are refinancing an amount that is 80% of the value of the home, then you put nothing down (and don’t pay PMI.
On HUD foreclsures: If you plan to buy a lot of houses to rent (like I do, for the cash flow) then don’t bother HUD foreclosures because they require 25% down for investors( but they do pay closing costs, unlike VA). If you are going to buy, fix up, then sell, then HUD is great cause they typically sell cheaper than VA, and when you sell you get your 25% back, thus turning it into a “no money down” deal. I don’t think it’s worth the effort to put 25% down and then rent a HUD home, primarily because you need to refinance to get your 25% back out, and you can’t do that right away and that ties your money up, preventing you from purchasing more properties. Well, this has been my two cents.