Buying A Foreclosure Home With No Money Down

There are several ways to accomplish the purchase of buying homes without using any cash. this article is just a couple of way of doing it. Owner occupents are the focus as these tactics are available to investors.

Federal Housing Administration (FHA) foreclosure homes are different from any other type of foreclosure home in that there are several methods of buying a property utilizing low money down or no money down techniques. It is essential to first understand the several different ways in which the FHA lists the foreclosure homes that they are selling.

IN = Insured

IN indicates a foreclosure home that currently meets minimum property standards (MPS) and is currently in livable condition. IN foreclosure are not currently available with no money down, but can be obtained with no money by applying these techniques.

Simply bid on the foreclosure home using an FHA 203b mortgage (as seen on the HUD contract) and then have the foreclosure home inspected. Be certain that you are with the home inspector and that the home inspector understands that you are interested in finding the deficiencies of the foreclosure home. Be sure the foreclosure home deficiencies are included in the necessary MPS items, including structural, heating and plumbing—paint and carpet will not be enough.

Send the foreclosure home inspection along with your request to include the necessary funds in the price you are paying for the foreclosure home. Repair funds requested must exactly meet the increase of the purchase price for the foreclosure home. Be sure that the amount requested is less than $5500 and that is approximately the three percent you were required to put down on the mortgage.

You could increase the amount of money received for repairs by applying for a 203k mortgage after the foreclosure home has been inspected. This raises the amount of funds received to a possible limit of 110% of the value of the foreclosure home after repair.

IE = Insured with Escrow

IE indicates a foreclosure home that requires some degree of repair in order to meet MPS. Additionally, IE foreclosures are not currently in livable condition. These foreclosure homes are not currently available with no money down but can be acquired with no money by applying these techniques.

Simply bid on the foreclosure home using an FHA 203b mortgage (as seen on the HUD contract) and then have the foreclosure home inspected. Be certain that you are with the home inspector and that the inspector understands that you are interested in finding the deficiencies of the foreclosure home. Be sure the foreclosure home deficiencies are included in the necessary MPS items, including structural, heating and plumbing—paint and carpet will not be enough.

You could increase the amount of money received for repairs to the foreclosure home by applying for a 203k mortgage after the foreclosure home has been inspected. This raises the amount of funds received to a possible limit of 110% of the value of the foreclosure home after repair.

UI = Uninsured

UI indicates a foreclosure home that requires repairs in order to meet FHA standards and that is currently not in livable condition. UI foreclosures are available with low money down but can be obtained with no money down. It is even possible to buy these foreclosure homes and make a substantial profit if you apply the following techniques.

Simply bid on the foreclosure home using an FHA 203k repair mortgage (as seen on the HUD contract) and then have the foreclosure home inspected. Be certain that you are with the home inspector and that the inspector understands that you are interested in finding all of the deficiencies of the foreclosure home. Be sure that the foreclosure home deficiencies are included in the FHA minimums, including structural, heating and plumbing—paint and carpet will not be enough.

The home inspector will send the foreclosure home inspection to the mortgage lender along with the financial requirements to do all of the noted repairs. The inspector’s assessment of the repair cost can be adjusted up or down in order for you to get enough money to complete the repairs. Be sure to allocate enough so that you can break even on the purchase. If you have any need for additional cash, include a margin so that you can either add to your savings or pay some additional debt off. The maximum mortgage allowed is 110% of the value of the property after repairs. The bank generally frowns on this practice, but if you act as the general contractor and work on the foreclosure home yourself, you can pay yourself for the work performed.

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HUD Foreclosures

HUD foreclosures and VA Foreclosures are some of the best homes to buy when price is part of the equation. As with most Americans, price is always a concern. If not buying the same house for less, why not buy more house for the same dollar invested? When looking for a good deal it is hard to do better than the VA or HUD foreclosures market. The simple truth is that there are just more VA and HUD homes on the market, as they represent such a large number of mortgages that are generated each year. This translates into more foreclosures just by the magnitude of difference between all others comparing to the two largest.

The two largest also being government owned and operated means that they have less time to wait to make money back on the home. The FHA is especially known for selling HUD homes for less than the average sales price in a given area. FHA foreclosures represent a fraction of HUD but they are still a significant number of homes and both should be considered.

VA (Veterans Administration) and HUD (Housing and Urban Development) have different and unique opportunities for the buyer. Both are often forgiven for the local taxes normally associated with the purchase of a home (this is on a county by county basis). Be sure to ask the local title company or escrow company to look into it for you before closing as this is often missed due to their are not used to dealing with the 2 to 3 percent of the market that VA and HUD foreclosures represent.

Foreclosure Listings Increasing

As the market settled after the mortgage meltdown foreclosure listings also settled and fewer homes were on the market with a placard reading “Bank Foreclosure” in big red lettering. This was a good thing for the entire real estate market. Having an abundance of foreclosures brings the entire market down and it makes it harder for home owners, who would like to move, to get the appropriate price for their home as a similar home down the same street was sold for substantially less and the appraiser is using the foreclosure as a comparable sale.

This is just one of the problems when there are too many foreclosure listings in any area. Another issue is the television set that sits in everyone’s living room harping about the price of homes based on the number of foreclosures and this constant barrage of negative information makes most people sit on the sidelines waiting for the market to either implode completely or to correct itself. Meanwhile while they wait, others are buying foreclosure listings and making great investments.

Whatever the reason, a market can only handle so many foreclosure listings at any given time. The more foreclosures, the lower the market gets and this is a lesson the banks that were foreclosing and selling off realized too late. The market and their investments would have been better off if there had not been a rush to divest themselves of the toxic assets made more toxic by their own actions.

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IN = Insured

IE = Insured with Escrow

UI = Uninsured

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