To obtain a conventional/residential loan on a foreclosed property your new lender will likely require that the property be in good condition. For example, the roof can’t need replaced, no mold, all utilities must be on and functioning which includes water & furnace. It is not uncommon for items to come up on the appraisal that the lender will require to be addressed prior to closing. When this occurs, commonly the seller won’t fix any problems nor allow you to fix them. If this occurs you won’t be able to get a conventional loan on the property. If you are looking to buy this house to live in you still have an option. The FHA 203k loan. This loan allows you to buy the property and also financing any necessary improvments while only putting 3.50% down of the entire project. For smaller jobs there is a streamlined version which makes the process faster and easier. You can still get to closing in 60 days. For larger projects, a HUD consultant is involved so we usually recommend some extra time to get to closing in case it's needed. If the home happens to be owned by Fannie Mae, they offer a program known as HomePath where well qualified buyers can purchase these homes with no appraisal needed which means any of the issues mentioned above become non-issues. Please call me to discuss your financing options if you are considering the purchase of a foreclosure.
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