Are you someone who is in the market to buy a foreclosed home? Well, buying a foreclosed home is a little bit different from buying a typical real estate property. If you have enough unsecured high interest debt on your cards, you should start repaying them through debt consolidation companies or other debt relief options as you have to go through the process of taking out a mortgage loan and henceforth you will obtain better rates if you don’t have too much debt.
In the process of purchasing a foreclosed home, only one real estate agent is usually involved. The seller often wants a preapproval letter from the lender before he takes the plunge of accepting the offer. There is often little or rather no room for negotiation. The foreclosed home comes as it is and it is therefore up to the buyer to pay for all kinds of repairs. On the upside, most homes owned by the bank are vacant and the entire process of moving in can be fast.
Ensuring the best deal while taking the risk of buying a bank-owned home
Buying a foreclosure is certainly a bit of a grind as it’s not so easy. Although you’re getting fantastic pricing, yet sometimes it may take a lot of time to go through a number of houses and writing a number of offers. Throughout the nation, around one-third sales in May were of distressed properties and a huge chunk of those sales went to mostly first time homebuyers. Check out some tips.
1. Get pre-approved for a mortgage: The first two steps that you have to take before buying a foreclosed house is to locate a real estate broker and get a pre-approval from a mortgage lender. Shoppers should first visit a website that has a list of foreclosed homes. The goal of going through the list of “real estate owned” is not to find a house but to find an agent. Banks usually hire one broker to handle such properties. The next thing that you need to do is to get a pre-approval from a mortgage lender so that you know the amount of loan that you can afford to qualify for.
2. Pricing is not an easy factor: There’s no particular thumb rule as to what the bank’s bottom line is on the price. Just like you have to compare and contrast while buying other properties, here too, you have to look at the current sales price of such properties. There are times when the banks price the homes really low so that the home has multiple offers within a few hours of listing. Sometimes the bank prices the home too high and in such cases you can end up with a lower price. Always keep in mind that a foreclosed home is sold as it is and hence you shouldn’t expect to get a discount to compensate for repairs.
3. Boost your credit score and repay your debts: While getting a mortgage loan for a foreclosed home, you need to have a good credit score so that the lender relies on your repayment ability. In case your score is low enough, take immediate credit repair steps and then start repaying your debts. If you have a high debt-to-income ratio, the lender will have a doubt about your repayment ability and therefore he might charge higher interest rates to reduce their risks in the event of a default.
Hence, if you’re in for a foreclosed property, make sure you follow the above mentioned tips so that you can end up with the best deal that suits your current financial state and your affordability.