Buying a Foreclosure - What Type of Loan Can I Get?

Reader Question: I am interested in buying a home that went into foreclosure. The question is, what type of loan can I get other than an FHA loan because I have great credit and a good job.

I don't why you would be limited to an FHA loan. If you do have great credit and solid income, you will be a good candidate for just about any type of mortgage loan. The FHA insures loans made through private lenders, but I can't see why you would need that kind of backing ... seems like you're a well-qualified candidate for a mortgage loan that is within your means.

You're hearing a lot about the FHA right now because of their efforts to help "at-risk" homeowners refinance into more affordable loans. I'm guessing that will remain their primary focus for the next year or two.

There are a couple of things to keep in mind when buying a foreclosure property, that aren't a factor when buying a home under normal circumstances. For one thing, keep in mind that you'll need to be approved by the lender who has foreclosed on the property. This can be a time-consuming and often confusing process where you don't get much information. Investors often complain about this part of the process. So if it's your first time buying a foreclosed home, be sure you read up about the process that's involved.

Also, if the home ends up being sold through a real estate auction, you would actually need to have all of the financing up front. In other words, you would need to have the cash to buy the home right after successfully bidding on it.

But as far as getting approved for a mortgage in general, your options will probably we wide open if you have great credit and sufficient income.

I hope that helps you out some. You can learn more about the process of buying foreclosed homes through the Foreclosure City section of our website.

Buying a Foreclosure Home With Bad Credit

Reader Question: I want to buy a foreclosure home but I have poor credit. What can I do?

If you plan to buy a foreclosure home at a real estate auction, which is one of the most common ways to purchase these homes, you would have to pay cash for the home. It's just like any other type of auction in that way -- you're expected to pay for the item (in this case a house) immediately following a successful bid.

So in that scenario, your credit score wouldn't matter because you'd be paying cash for the foreclosure property.

Of course, if you don't have that kind of investment cash to put down on a foreclosed home, it's another story entirely. In this scenario, your credit score would be a factor because you would have to get a mortgage loan.

When homeowners default on their mortgages, the property will generally be sold in one of two ways. It might be sold before the foreclosure process through a real estate short sale. Or it might be sold after foreclosure through the auction scenario I mentioned above. If it is sold through a short sale, you could theoretically get a mortgage loan to buy it. But if it's sold after the foreclosure at an auction, you will need to have cash available to buy it after bidding.

So if you don't have the cash to buy a property at a real estate auction, and your credit problems make it hard to get a loan to buy it in the pre-foreclosure stage ... you might not be able to proceed with your plan. If that's the case, the best you can do is to focus on fixing your bad credit situation first.

We just published a new video on this subject earlier today. You can check it out below.

Buying a Pre-Foreclosure Home - Lender Wants to Approve Me

Reader Question: I am buying a pre-foreclosure home. Countrywide has the mortgage and I already have my financing set up. Now they want to "approve me" to see if I am worthy of their business. Does this seen right to you? I am not getting a loan through them nor do I want to.

Yes, it's very common for lenders to review a buyer, as they are doing with you. A lot of investors who buy foreclosure homes on a regular basis complain about this very thing (lenders dragging their feet). When you buy a home in the pre-foreclosure status, the process can be delayed by several things.

The process varies from one state to another, based on the foreclosure laws in a particular state. A homeowner has certain rights before the bank can foreclose on the home, and thus there is a time frame associated with the process. In most cases, the homeowner has two to three months to get caught up on their missed payment (through reinstatement or repayment).

It all starts when the lender files the initial paperwork for a foreclosure proceeding, and it can be several weeks later before they actually foreclose on the property. And again, this process varies by state.

If you have your financing lined up, then you have an advantage. But it still won't change the fact that there are certain time-consuming steps the lender has to take before selling the property.

I just found a good Q&A thread over at Trulia.com on this very subject. You might want to check it out. It's worth reading, because it's relevant to your situation.

Related Article: The Basics of Buying a Home in Foreclosure

Hope that helps clear things up a bit. Good luck.

How Much to Offer On a Foreclosed Home

Reader Question: What is a good price to offer on a foreclosed home?

This is a hard question to answer because so many variables are involved. The process of buying a foreclosed home varies from one state to the next, one property to the next, etc. It's much less predictable than a regular home purchase. So while I can tell you how the bidding process usually works, I can't offer any specific pricing strategies on a hypothetical property.

There are several scenarios through which you can make an offer on a foreclosed home. It depends on how far along the foreclosure process is for that particular home. For example, if the bank allows the homeowner to sell the home through a short sale process, then your purchase offer will need to be approved by the lender (not by the seller).

However, if the bank / lender has actually foreclosed on the property, then you will probably have to attend a real estate auction to bid on the home. In this scenario, the home will be listed at a starting price, and the auction attendees will then bid on it. The highest bid wins, like any other auction. One thing to realize is that you'll need financing lined up before attending a foreclosure auction. You must be able to buy the property that very day, if you happen to be the highest bidder.

Another scenario takes place if the home does not sell through the foreclosure sale / auction. In this case, you can submit a sealed bid to the owner (which will be the bank or lender who foreclosed on the property).

See also: The Foreclosure Buying Toolkit

Closing Process on a Foreclosure Home

Reader Question: When purchasing a foreclosure home, how long should it take to get keys to the property after closing.

The closing process for a foreclosure property is very similar (sometimes identical) to the closing on a regular home. Once you have closed on the home, it's yours. So you should either get the keys at the time you close or shortly thereafter.

The steps leading up the closing, however, can sometimes be a long and frustrating process. I often get questions from frustrated investors / buyers who have been waiting an unusually long time to close on a foreclosure property.

There are several reasons for such delays. For one thing, state laws may require a certain sequence of events to take place, and that sequence could be time-consuming. On top of that, lenders are taking longer to do everything these days (and requiring more paperwork) as a result of the financial crisis we are in right now.

But once you reach the actual closing process, you should get the keys right there on the spot or shortly afterward. Unless, of course, something goes wrong during the process.

Buying a House After Foreclosure

Interested in buying a house after foreclosure as a way to save money? If so, there are a few things you need to know. Actually, there are many things to know before buying a foreclosure property, but we will start with three...



Foreclosure fever continues to sweep across the United States. Despite government efforts to help (such as the new FHA refinance program), we are still seeing record numbers of home foreclosures across the country.

While these trends represent hardship for the homeowners, they also represent opportunity for home buyers and investors. And let's face it ... it doesn't do the economy any good for these houses to linger unsold after the foreclosure process. When investors buy these properties, it helps to stimulate the economy and move the housing market forward.

This is why we frequently offer tips for buying a house after foreclosure here on this blog. It's also the reason we created Foreclosure City for real estate investors. In that section of our website, you'll find a variety of tools and advice to help you through the process of buying a foreclosed home.

Buying a Property After Foreclosure - What You Should Know

But before you venture forth into this world of real estate investment, there are certain things you need to know. I recommend purchasing a book that explains the details of buying a house after the foreclosure process. It's a popular topic these days, so there are many books on the market. Stop by Amazon.com and see what you can find.

In particular, there are three things I feel a would-be investor should know about buying a house that has been foreclosed upon. Without further ado, here they are...

1. You Will Probably Buy at an Auction

If a house does not sell during the pre-foreclosure stage (like through a short sale process), then it will almost always go to the auction state. So if you are truly interested in buying a home after foreclosure then you'll need to learn as much as possible about real estate auctions and how they work in your state.

2. You Will Probably Be Paying Cash

If you buy a house at an auction, you will have to pay for it on the spot. It costs the lender money to maintain a house after foreclosure -- and to promote it, sell it, etc. The last thing they want to do is waste time with buyers who lack financing. In fact, your finances will probably be verified in some way before you are allowed to bid at the auction.

3. You Will Have Limited Inspection Opportunity

Many houses that are sold after a foreclosure process are sold as-is with no warranties. On top of that, many homeowners who know they will be foreclosed upon will neglect the home. Some will even damage the house intentionally out of anger or frustration. So for these reasons, it's best to view the property before bidding on it.

You probably won't be able to schedule a full inspection, as you would with a regular purchase process. But anything is better than nothing -- even if it means visiting for a quick walk-through. The point here is that there's more uncertainty involved when buying a house after foreclosure than with the traditional purchase process.

=========================
Learn more about foreclosure buying
=========================

Buying a Home at a Real Estate Auction

The concept of buying a home at auction has become increasingly popular in recent months. The reason for this popularity is clear. There are simply more foreclosure homes on the market today than there have been in the past.

For home buyers / real estate investors, the attraction of buying a home at auction is the fact that you can often purchase a home for less than market value through an auction.

Of course, it's not always that simple. Some foreclosure homes, for example, never even make it to auction and are sold through a real estate short sale process instead. And the homes that do make it to auction are often price-inflated by inexperience bidders who drive the price up (which sort of defeats the purpose of buying a home at auction altogether).

We have recently posted a new article on the subject of real estate auctions. If you think you might be buying a foreclosed home through auction in the near future, you'll find this new article helpful.

Read it here:
Real Estate Auctions 101

P.S. -- You'll find more articles on this subject, and plenty of other helpful resources, by visiting Foreclosure City.

Guide to Buying Foreclosed Homes

Buying homes in foreclosure continues to be a popular strategy for home buyers and real estate investors alike. But you need the right tools and knowledge to do it successfully, which is why we have added even more info to our guide to buying foreclosed homes ... check it out here.



In our foreclosure buying guide you will find a variety of helpful articles to help you understand the process of buying foreclosed homes in your area. You also get access to helpful tools and foreclosure tracking services, such as the one shown above!

Remember, when entering the world of investing, you need to prepare yourself by doing careful research and planning. This is true whether you're buying foreclosure homes or mutual funds. It's just good practice to "look before you leap," and we feel our guide to buying foreclosed homes will give you much of the information you need.

Go there now:
Guide to Buying Foreclosed Homes

Related article: The Basics of Buying Foreclosure

Buying a Home in Foreclosure

As the winds of foreclosure continue to sweep across the United States, they bring hardship as well as opportunity.

Obviously, the hardship is felt by the homeowners who are foreclosed upon. After all, what could be worse than losing your home due to a mortgage foreclosure. On the other hand, there are home buyers and investors who see buying a home in foreclosure as a great opportunity to save money on a property.

When it comes to foreclosed properties, one person's loss is truly another person's gain.

So if you're one of those people who see buying a home in foreclosure as an investment opportunity, we have some tips for you.

• The first thing you should do is research the foreclosure process in your state. Understanding how homes get foreclosed upon is the first step to success with buying foreclosures.
• Next, you'll want to sign up for a tracking service that alerts you to new home foreclosures in your area. After all, you can't make an offer on a property or follow it to auction if you don't even know it's been foreclosed on. Check out our editor's choice for foreclosure tracking services.
• Have your financing in order. Foreclosure homes go fast these days. You're not the only one who has been watching the news and noticing all of the foreclosed homes on the market. If you don't have ready access to financing, you could get beat out by a more "liquid" investor who is buying foreclosure homes in your area.
• Learn the real estate auction protocol. The obvious reason investors buy foreclosed homes is to get a property for less than market value. But if you start a bidding war at a foreclosure auction, you could drive up the price and defeat the whole purpose.

I hope this brief tutorial on buying homes in foreclosure helps you to make smart financial decisions and good investments. Good luck out there!