The opportunities to find a home or real estate investment property are outstanding due to the many foreclosure properties in the realty market. The single question standing in the way of buying one of these properties is this: Where can you find the money to arrange the financing?
Many consider that the first option is to finance the buy with a conventional mortgage. That strategy, though, doesn’t cover cases where the best deals go to buyers with cash. For that reason, it’s good to know about special deals that are available for buyers and real estate investors.
Recent data from the National Association of Realtors show that 29 percent of all homes sold in February were classified as either short sales or foreclosures. About one-third of these sales were bought with cash, illustrating that investors are heavy into this market. Here are different types of foreclosure sales that buyers and real estate investors can check out.
Many buyers consider the sheriff’s auction as one of the best places to find deals on foreclosed properties. These auctions are usually the first place where repossessed properties show up on the market. Be aware, though, that this is not the place to arrange mortgage financing. These sales are cash on the barrelhead. There’s a risk involved, too. Buyers usually don’t have an opportunity to inspect the property. That means you’re buying blind and could end up with a dog. The property could be encumbered with liens, too.
Investors are around who will offer private loans to buyers. These are called hard money loans, but they are usually offered only to experienced buyers.
Another way to buy these distressed properties is via real estate owned properties (REOs). These are homes that the bank kept after a sheriff’s auction. The banks will offer these homes in the realty market like any other home listed on the MLS. You have the opportunity inspect these homes before buying and arrange mortgage financing.
Fannie Mae HomePath
Homes held by Fannie Mae can also be purchased as REOs. The HomePath program offers these REO homes for as little as 3 percent down. No lender appraisal or mortgage insurance is required. Fannie allows buyers to borrow up to $35,000 for repairs and renovations as an element of the buyer’s mortgage. The HomePath program is offered to investors, such as those buying to rent. It’s also available to buyers who plan to become owner-occupiers. Fannie Mae REO offers another program called HomeSteps that lists repossessed properties.
Foreclosed homes acquired by the VA are offered to investors and buyers under VA Vendee Financing. Both veterans and non-veterans can participate. This program is similar to a VA mortgage where homes can be bought for no money down for owner-occupants. Investors can buy for as little as 5 percent down. Investors can purchase multiple homes.
Buyers may also assume VA mortgages, meaning they can take over a mortgage from a previous owner. This is an ideal way to buy into home that is in foreclosure but has not been repossessed yet. The buyer simply takes over the owner’s mortgage and pays off the remainder of the debt. There may even be opportunities where there are homes available with equity.
Buyers can apply for a HUD home purchase with as little as 3.5 percent down. The FHA 203 (K) loan program allows buyers to borrow up to 110 percent of the property’s value for repairs. This loan is limited to owner-occupiers.
Contacting the owner of a home in foreclosure and offering a purchase price lower than their payoff before it slips into repossession is called a short sale. This purchase can be made with a regular mortgage loan. This purchase can be arranged with any mortgage lender. We firmly believe you should compare at least two loan quotes from different mortgage lenders. Trust on this tip – after all, we have experience in mortgage loans.