How to buy foreclosed home has articles on government foreclosures, bank foreclosures, pre foreclosures, court house step foreclosures, and more. You will learn how to invest in foreclosures using various real estate investment methods. There is in depth information on where to find foreclosure listings. You will learn how one type of foreclosure differs from another, and which one is best for your situation. Where to find money to invest is also covered, as is how to find a good lender, and how to find a good real estate agent. Short sales are explained in detail. How to sell your foreclosure after you buy it is spelled out for you. There is also techniques on how to buy privately owned homes too. The best foreclosure websites are revealed to you. How to find deals where no down payment is needed, and where closing costs can be paid for you. Every aspect of the foreclosure process is spelled out for you.
1. Credit Score Lenders like to see a median credit score of 620 or higher. They use the 3 main credit reporting agencies, Equifax, Trans Union, and Experian, find your score from each one, and take the middle score as the determining score.
This middle score has to be at least 620, and some lenders need to see a higher number before they will consider you for a home loan.
There are some exceptions where a lower score than 620 will be considered, but this is not a normal criteria, and if a lower score is considered, the other factors must be good.
2.No Bad Credit History If you have had a foreclosure, repossession, or a Chapter 7 bankruptcy in the last 3 years, you will not be considered. If you have had a short sale or a Chapter 13 bankruptcy in the last 2 years, you will not be considered.
Lenders also like to see stable employment, and credit history from the end of these issues to the current date, in order to be considered for a home loan.
3. Stable Work History Lenders like to see a stable work history. They want to see that you have been on your full time job for at least the last years.
It may be permissible to have more than one job in the last 2 years, but it must be in the same industry, or type of work, and, the gap between jobs must be minimal.
Of course, lenders will need to see proof of income, usually based on tax statements, and/or tax returns.
4.Debt to Income Ratio To be considered for a home loan, lenders like to see a debt to income ratio that is low on the debt side, and high on the income side.
Some debt is ok, even preferred, but your income should be considerably higher than your debt. How much higher depends on the lender, but generally speaking your debt should not be more than 1/4 of your income.
A mix of debt, car loans, mortgages, credit cards, etc., is usually preferable, as this shows a longer credit history, and usually means that you pay back your debts. Of course, the more income you have, the higher priced home you can qualify for.
The area where you live will help determine how much income you need in order to qualify, as home prices can vary greatly from city to city, and state to state.
5. Payment History Your credit score will usually reflect your payment history, at least to some degree.
Lenders will delve deeper though, and find out how well you have paid back your debts, as this is a very important factor in the pre approval, and/or approval process.
If you show a pattern of on time payments, with few, if any, late, or missed payments, you will be on the inside track to your goal of qualifying for your loan.
6. Collateral If you have additional assets such as cash reserves, retirement accounts, stocks, bonds, precious metals, etc., this can go a long way in easing lenders concerns that you will pay back the mortgage that they provide you.
Although they can’t go after your assets in the event of a default, they know that if you have financial means beyond your income, you also have the ability to make good, if something happens to your income. These extra assets can be the difference, in many cases, of a yes, or a no, in the approval process.
If you can meet these criteria, good for you. You are on your way to being preapproved for a home loan, and ultimately approved. If not, use these criteria as your guide, and strive to achieve them.
Also, a good lender will give you more details on how to improve your credit, and structure your finances, so you can qualify in the shortest possible time frame.
A For Sale By Owner – FSBO property, also know just as a FSBO, pronounced fizz bo, is a property that is put up for sale by the homeowner, without the assistance of a Real Estate Professional.
Some homeowners believe that they can cut out the real estate agent, and thus net more profit from the sale of their home by selling it themselves. Approximately 5% of homeowners choose this route in an attempt to sell their home.
As a real estate agent, I can tell you that this is usually not a good idea to try to sell your home yourself. There are many reasons why hiring a licensed realtor to list your home is a good idea.
The typical commission paid to a realtor for the sale of your property ranges from about 5% to 7% of the sold price. In almost every case, this commission is well earned and justified.
1.Realtors list your home in the Multiple Listing Service.
By having your home in the MLS, you are exposing your property to every other realtor in the area.
When a realtor has a client that is looking to buy a home in your area, they go into the MLS, and find the available homes that fit the buyer’s criteria, such as number of bedrooms, baths, square footage, finished basement, price range, etc.
If your home is in the MLS, and fits the criteria, the buyer’s agent will send it to the buyer via email, or they will call them and tell them about it.
If the buyer likes it from the pictures, and the features of the home, they will set up a showing. Without having your home in the MLS, you are missing out on 90% or more of the buyers in the market for a home.
They will tell you if a coat of paint is needed in a certain room or rooms due to loud, or outdated colors.
From my experience, many buyers cannot look past cosmetics of a house that are outdated, or in bad condition.
Also, curb appeal is important, so it may be a good idea to put a fresh coat of paint on the outside of the home, along with some manicuring or landscaping of the lawn.
As homeowners, we sometimes don’t realize that with a little work, and a small investment, we can significantly increase the value of the home, and help it sell a lot faster. Realtors also know what other homes in your area have been selling for.
They will run comparables to make sure that your home is priced accurately, and fairly. If you get this wrong, which many For Sale By Owner – FSBO listings do, the home won’t sell.
Many people believe that, due to an emotional attachment, their home is worth more than it really is. If it is priced too high, it simply won’t sell.
3. Realtors have a network built up of other realtors, lenders, and many other people in real estate related businesses that can help them find buyers.
Also, within a real estate professional’s office, there are many times dozens of other agents.
These offices put priority on selling the listings within their office, so a listed home will garner a lot more attention as a result.
These other agents will hold open houses, place advertising, set up showings, and tell their own networks about the home.
When you have a large number of realtors pulling together to sell a home, it sells faster, and can even command a higher price.
4. Buyers don’t like viewing homes when the homeowner is there.
Ever wonder why realtors insist that the homeowner is not there during showings?
It is primarily because the potential buyer won’t feel at ease. They will be much more guarded in what they say, and do, so as not to insult the homeowner.
There is more of a feeling of invading someone’s space that can be quite uncomfortable. If a buyer doesn’t feel comfortable, they are more likely to hurry through the showing, not ask as many questions, and, as a result, not put the particular home on their ‘short list’.
5. Realtors handle every aspect of the sale. When a home is listed, the Realtor will take charge of the sale.
They will take care of all the paperwork, get all the information to include in the Multiple Listing Service listing of the home, so as to accentuate the positive attributes, and then put the home in the MLS.
They will set up the lock box on the home, set up any showings, place prominent signs in yards, and on street corners, place advertising online, in magazines, in local grocery stores, and in other local businesses.
They will negotiate offers, coordinate signings, and do whatever is necessary to ensure that the home moves toward closing, and ultimately closes.
If an amateur attempts to undertake this process, he or she is likely to encounter hurdles that they simply cannot overcome.
In other words, if you go the for sale by owner – fsbo route, you will have to take on all of the paperwork, and the other aspects of the real estate transaction which can be daunting.
6. Realtors are liable should problems arise. Many things can go wrong during the period that a home is for sale.
There can be theft, or damage to persons, or property during showings.
There can be mistakes in the paperwork, such as errors, and omissions, know as E & O. Once a home is listed with a Realtor, the home owner is protected against many of these issues which could, and occasionally do arise in the course of the home sales process.
If a homeowner elects to sell the home himself with a For Sale By Owner – FSBO, he may be fully liable for any problems which occur, which may result in a nightmare scenario.
7. Security If you place a For Sale By Owner – FSBO sign in your yard, you are inviting anyone and everyone to come knock on your door.
They could have bad intentions, and if you let them in, they could seek to do you harm, your children, or perhaps to case the place to see what might be worth stealing.
If you happen to be a woman living alone, you could be placing yourself in a very unsafe scenario.
On the other hand, if you list with a Realtor, everything is documented. Before Realtors represent a client, they do their due diligence. They know their clients name, some of their history, their credit status.
They determine if they are a ready, willing, and able buyer. Realtors insist that the homeowner and any other occupants are gone during showings. I don’t like to be this cynical, but in today’s world, one can’t be too careful.
If time and money don’t matter to you, then go the For Sale By Owner – FSBO route.
Some things are just worth the money. Don’t be penny wise, and pound foolish. Hire a good real estate agent to sell your home!
When the owner of a property owes more to the lender than the property is worth, called being ‘upside down,’ this is how short sales are defined, or potential short sales. Short sales can be caused by numerous factors.
A drop in the U.S. real estate market like what happened in 2008, when the sub prime lending crisis caused many properties to lose as much as 70% of their value. Also, several other factors like lack of upkeep on the property, an increase in crime in the area, an economic slowdown, or the discovery of something negative in the area can cause a property to lose some or most of it’s market value.
So, as a result, a borrower may find himself making large payments on a home that may never recover the lost value.
In order for the borrower to get out from under this loan, they may approach the lender and ask them if they are willing to accept a short sale.
This means that the borrower/homeowner is asking the bank, or lender to accept less money than what the loan was originally granted for, and what is owed on it.
Many times a realtor will assist the homeowner with the communication with the lender, and help set up the short sale for the homeowner.
There are two types of short sales: approved short sales, and unapproved short sales. An unapproved short sale is where a homeowner will attempt to sell the home for what he can get without the lender giving it’s blessing for the sale. More back and forth is needed for the bank to approve the short sale.
An unapproved short sale can go on for many months, as the lender may or may not accept the offers that are generated. It is the lender’s decision wholly to participate or not.
They may wait to see how many offers come in, and for what price before they accept any. Or they may do nothing at all.
I have seen unapproved short sales drag on for what seemed like an eternity. Some took well over a year to come to fruition.
It is possible to find a great deal as a buyer of this type short sale, but is not ideal for someone with a timeline for making a home purchase. An investor that doesn’t need the home to live in, is best suited for pursuing an unapproved short sale.
Once an offer has been accepted by the lender, it is then considered an approved short sale. If this sale falls through for whatever reason, usually financing, the property will go back up on the market as an approved short sale.
An approved short sale, on the other hand, has the lender’s approval or blessing, if you will, for the sale. These approved short sales normally go through the sales process in a much smoother fashion.
Mortgage holders or lenders normally do not approve short sales unless the homeowner shows that he is unable to live up to the mortgage obligation.
The bank is saying that it wants to sell the property, and is in agreement with the realtor, and the homeowner regarding the sale, and that any other lien holders on the property have also given their approval.
If a buyer moves quickly with an approved short sale, it is possible to get a great deal, but the approved short sale can sell quickly, as the price is normally low, and the lender is willing to close within a reasonable amount of time.
Short sales are listed on the Mulitple Listing Service, or the MLS. All Realtors have access to this information, and by hiring one, you will be given this information.
From a buyer’s or investor’s perspective, before you decide to buy a short sale, do your homework on the property, and the situation. You may be able to find a great deal in a short sale, or you may take on a long, nightmare scenario. I have seen both.
As an investor, I suggest becoming an expert in short sales before taking the plunge in buying them, or at the very least hire a real estate agent or broker that is experienced with them, and can guide you through the potential pit falls.
The main thing to keep in mind is, if the short sale is approved, it should be smooth sailing. If a short sale is unapproved, it could be a long, difficult process.
Pre foreclosures are properties that are in default due to the property owner not meeting his obligation to pay an outstanding mortgage amount that is owed for at least the previous 90 consecutive days.
A pre foreclosure is not the same as a short sale.
The pre foreclosure point is started when the lender files a notice of default in non judicial foreclosure, or lis pendens, in judicial foreclosure,( depending on the state ) on the property, which is legal notification to the property owner that the lender will start actively pursuing legal action if the debt is not paid.
The property owner now has the chance to pay what is owed to the lender or, if he chooses, can attempt to sell his property prior to it going into foreclosure.
These notices of default are found in your local newspaper, and on some real estate websites.
They are often under the Foreclosure section, but are not technically foreclosures until the default period expires, and the homeowner has not paid what is owed.
If the homeowner pays what he owes, this will end the foreclosure pursuit of the lender. It is vital to know if the property is still available before spending a lot of time and energy on it.
The surest way to determine if the property has been reinstated, is to call the attorney or trustee attached to the particular foreclosure.
These folks can let you know if the property is still available, but won’t be able or willing to give you specific answers about the property.
The default period, the amount of time between when the lender notifies that the property is in default, and when the property is in foreclosure can last several months or more.
This is at the discretion of the lender. Most lenders would rather the existing borrower pay what is owed, than have to take the property back, and resell it.
Lenders are in the business of making loans. They are not in the real estate business.
If the homeowner is smart, once he or she finds themselves in this pre foreclosure situation, they will be in touch with their lender.
The lender or mortgage company may be willing to work with the homeowner to attempt to avoid foreclosing on the property.
However, if the homeowner does not take the initiative to contact the lender, it is unlikely that anything will change.
It is very possible for an investor to strike a good deal during this period of time. The homeowner may be willing to take a steep discount from what his home is worth, in order to get out from under his debt obligation that he is having trouble paying.
Be aware that the owner may be getting deluged with phone calls, mail, and in person, of people wanting to buy his home.
He may not be open to the idea at first, but may change his mind as he gets closer to the date of losing his home.
It is also possible that he will list his home with a real estate agent. If this happens, you chances for a great deal decrease somewhat, but, the homeowner may be willing to make a deal as his time as owner is about to end.
Whether or not the homeowner is willing to make a deal will depend also on the amount of money that is still left on the loan, and the market value of the property, which will determine how much equity is in the home.
If there is more owed on the property than the property is worth, called being ‘upside down’, it would then be considered a short sale situation.
Time is of the essence, however, in this pre foreclosure situation, as the property must close prior to the home falling into foreclosure.
Once it becomes a foreclosure, the homeowner no longer owns the property, the lender does, and the homeowner is then out of options.
At this point, you the buyer may still be able to get a good deal on this property as it is now officially a foreclosure.
Depending on the type of foreclosure that it is, you may have an opportunity to buy it at the courthouse steps for cash.
If the foreclosure survives the courthouse steps without a buyer, it may show up in the MLS, Multiple Listing Service, as a bank foreclosure.
Learning the process of pre foreclosures can bring you some great deals if you are willing to move quickly.
You should also have cash reserves, and/or a great credit rating or line of credit, and the ability to convince the affected homeowner that selling to you is his best and only logical course of action.