There are many types of properties you can purchase with a VA mortgage--condos, townhomes, even farm homes are available for purchase although the VA will only guaranty a loan for the residential value of a farm property, not the commercial value.

Another option some VA loan applicants want to consider? Purchasing a foreclosed home. The potential savings you could realize by purchasing a home in foreclosre can’t be ignored. For those who understand the sometimes “fixer-upper” nature of a foreclosed home, buying one might be a good move.

The Department of Veterans Affairs has recently sent out guidance reminding borrowers and sellers alike about the rules that govern purchasing a foreclosed home with a VA mortgage. When you buy an ordinary home on the market using a VA loan, an appraisal is required as part of loan approval. This appraisal may result in mandatory repairs or corrections to the home in order for it to be sale-worthy under the VA loan program.

And those rules don’t change when it comes to foreclosed properties. According to the recent guidance from the VA, (VA Circular 26-14-5) “VA requires that all properties, including foreclosed properties, be in a condition that meets VA MPRs, or that the property must be repaired to meet the MPRs prior to loan guaranty.”

That seems clear enough, but what happens when the foreclosed property requires repairs or corrections to meet VA standards?

“In those cases where repairs are required, the VA fee appraiser must list on the appraisal report any repairs necessary to meet MPRs, and provide an estimate of the fair market value for the property as if all of those repairs have been completed.”

When such repairs must occur before the loan can be approved, VA loan rules say either the seller or the buyer can pay--in fact, it’s a good idea to negotiate those details. If the buyer agrees to pay for the repairs, VA loan rules states, “If necessary, escrow for the Veteran purchaser may be established to accommodate making the required repairs. Speak to your loan officer about what may be required to establish an escrow account for such needs.