Financing a Foreclosed Property


Being prepared is the key to financing a foreclosed property. The good news is, if a foreclosed property is in decent condition and you have a good credit history, the deal could work like a traditional home purchase. Of course, whether a loan will be offered or what the loan's interest rate might be may be influenced by the home’s condition and whether the property will be used as a primary residence or if it’s being purchased as an investment.



First step: Get pre-approved



If financing is going to be needed, you’d be wise to begin talking to lenders long before attempting to buy a foreclosure property. Aim to become pre-approved for a mortgage, not just pre-qualified. That's solid advice for any home buyer, but it is especially important in the foreclosure market, where good deals are snapped up quickly and regular buyers are competing with investors who are able to offer cash.



If you're trying to buy a property from a lender, it may help to get a pre-approved mortgage from that particular lender. Doing so may cast your bid in a more favorable light, even if it’s similar to others. Plus, you're not locked in if another lender offers you better terms. You can always change your mind and get your mortgage from another source.



Investigate 203(k) loans



If the home you fall in love with is not in livable condition, traditional financing may not be an option. These homes often go to cash investors who don’t actually plan to live in the home.



For would-be owner-occupants without cash, the federally insured 203(k) loan may be a good alternative because borrowers can roll projected rehab costs into the loan.



Buyers going this route generally must hire an independent, FHA-certified consultant to review contractor cost estimates. Interest rates on 203(k) loans are higher than on standard FHA-insured loans, and a buyer also can expect to pay 1 or 2 points (a point is an upfront charge equal to 1 percent of the loan amount).



Foreclosed condos difficult to finance



It's also important to note that obtaining a loan for a foreclosed condo may be significantly more difficult than getting financing for a single family home. That’s because distressed condos, lost either by homeowners or developers, can flourish or flounder depending upon fellow owners.



Many banks won’t finance a purchase in a building where more than 15 percent of a building’s homeowners have overdue association assessments or in a building with a high percentage of rental units. Ask about these factors before falling in love with a condo for which it’s going to be difficult to find financing.

Other Resources in Foreclosure Center

Buying a Bank-Owned Property

Buying a Pre-Foreclosure Property

Effects of Foreclosure on Your Credit Rating

Foreclosure Glossary

Interested in Buying a Foreclosure?

Investigate Property Liens

Local and State Foreclosure Laws

Mistakes to Avoid When Buying a Foreclosure

Preventing Foreclosure

Short Sale vs. Deed in Lieu of Foreclosure

Tips for Tenants in Foreclosed Properties

Types of Foreclosures

What is a foreclosure?

Ask Your Agent a Question

Ask Our Lending Partner a Question

Download Our Mobile App

Download Millions Mapped

Property Search








Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

Roman Lopez
1801 S. Mopac Expwy. Ste. 100
Austin, TX
512-947-2250
512-448-4822