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NORRIS: The Department of Veterans Affairs tries to make it easier for vets to buy houses by guaranteeing loans. Nowadays, there's a huge number of foreclosed homes on the market and in many areas, those homes are the best deals.

But VA loans come with lots of rules and requirements and vets trying to use them are running into big problems. NPR's Yuki Noguchi explains.

YUKI NOGUCHI: It's in pretty much everyone's interest that someone buy up foreclosed homes. It's good for neighborhoods. It's good for banks. The economy benefits and the buyer gets a home to live in. But buying a foreclosed home or one in short sale can be difficult, especially if you're a veteran and want to use a VA loan.

Take Eric Warner. A third of the homes he looked at in Palmer, Alaska, were foreclosures.

Mr. ERIC WARNER (Military Veteran): But there was no point in even looking at them because they'd tell us upfront: No VA loans.

NOGUCHI: The VA and Federal Housing Administration have long offered loans designed to help veterans and middle class buyers. The VA guarantees up to 25 percent of a loan, which makes it possible for buyers like Warner to put no money down. The subprime crisis gave no down payment loans a bad name. Now, more vets are drawn to the VA because they offer the best deal in the market.

But the VA loans require that houses must be in great condition - no repairs. In today's market, with so many foreclosures, this caveat often turns out to be a deal breaker.

Eric Warner.

Mr. WARNER: There's very few times that I felt embarrassed for being a veteran. But finding that, in many ways, it was becoming a stumbling block to securing a good home for my family was sort of shocking and embarrassing.

NOGUCHI: You might think that a bank with lots of foreclosed homes to unload might be eager for deals. But even in areas where foreclosures make up the bulk of what's on the market, realtors told me clients had trouble trying to buy distressed homes.

One woman in St. Louis says her family may abandon the VA loan option because the restrictions are just too frustrating.

After five months, Warner finally did by a house.

Did you ever consider giving up on the VA loan?

Mr. WARNER: Frequently.

(Soundbite of laughter)

Mr. WARNER: Usually at about 1:00 in the morning after, you know, one or two hours of my wife crying and saying, why is this so hard.

NOGUCHI: The irony is the VA says it created its requirements to help vets. The appraisal is the VA's way of protecting vets from sinking money into a rundown house they later might not be able to afford. Of course, normally foreclosures are relatively rare. Today, the market is flooded with them.

Mr. BILL WHITE (Assistant Director, Loan Policy, VA): We have talked among ourselves about, well, are we protecting somebody out of the home.

NOGUCHI: This is Bill White, assistant director of loan policy for the VA. White acknowledges the VA has gotten complaints about the rules. But he says the VA has no intention of changing its requirements.

Emily Winslow isn't sure what to blame for having to endure six months of bank applications, inspections and paperwork. During those six months, Winslow moved her family five times; from a hotel to friend's house, back to another hotel. Then at nine months pregnant, still waiting, she frantically searched for a rental.

Ms. EMILY WINSLOW: And no one could accommodate us because our stipulations were so challenging. Here we were just waiting on the deal and, you know, we have a month, maybe two, until this deal goes through. I'm having a baby in two weeks; can you please help us out? And they said no, I'm sorry, I can't.

NOGUCHI: The rental finally came through, but their offer remained in limbo. The house they wanted didn't pass the VA's inspection because of a termite problem.

Ms. WINSLOW: We were just so brokenhearted a number of times because it appeared that the whole deal was going to fall through.

NORTHAM: In January, Winslow's family bought a house in Augusta, Georgia. She still feels embittered by the process.

Ms. WINSLOW: If common sense were used we wouldn't have had to go through this. You know, maybe a wife is out there whose husband is deployed and she's going through this by herself and doesn't know what to do. I just - my heart breaks for people like that.

NOGUCHI: Winslow says there's good intent behind the VA's rules, but she doesn't understand how there could be so many homes out there needing families when so many families need homes.

Yuki Noguchi, NPR News, Washington.

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