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.
Roman Lopez is the owner of The Roman Lopez Real Estate Team, a full service real estate company specializing in Greater Austin home sales, purchases, and investments properties.
Roman has worked and excelled in the real estate business in Austin, TX for the last 7 years. Roman's real estate career started in 2008 where he was named Rookie of the Year for the KB Home Central Texas Division.
After a successful career with KB Home, Roman obtained his real estate licence and joined Keller Williams Realty where he again rose to the top and won Rookie of the Year for Keller Williams Austin.
After a year as a solo agent he built a team of top producing agent, The Roman Lopez Real Estate Team. His team now ranks as one of Keller Williams top teams closing over 200+ residential sales transactions per year.
Roman's designations include: Certified Negotiation Expert, Certified Distressed Property Expert, Certified International Property Expert, Certified International Property Expert, and Global Property Specialist.
Roman's Awards: Keller Williams Austin Rookie of the Year 2011, 2008 KB Home Rookie of the Year Central Texas Division, 2015 Platinum Top 50 Winner, Platinum Top 50 Finalist, 2014 NAHREP Top 250 Latino Agent in the US, 2014 NAHREP Top 20 Latino Agent in Austin, 32015 NAHREP Top 250 Latino Agent in the US, 2015 NAHREP Top 20 Latino Agent in Austin, 2015 Best of Angie's List, 2015 Real Trends Best Real Estate Agents, 2014 Best of Trulia Best Real Estate Agents
If it's your first time buying or selling real estate, you don't know
"The Roman Lopez Team is such a great group of people. Friendly and high informed in the real estate business. Claude Albarran helped my husband and I every step of the way when buying our first home. It was such a pleasant experience and we would highly recommend working with them when buying or selling your next home."
The information being provided is for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.
Based on information from the Austin Board of REALTORS®. Neither the Board nor ACTRIS guarantees or is in any way responsible for its accuracy. All data is provided "AS IS" and with all faults. Data maintained by the Board or ACTRIS may not reflect all real estate activity in the market.
IDX data last updated January 21, 2018 5:35 AM
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