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How to buy a Foreclosure (and get it closed!)

Real Estate Agent DRE #337069

Searching for and purchasing a foreclosed home can be quite frustrating and is getting harder to do. There is a shortage of inventory and especially foreclosures now. But you can still can get a foreclosure at a competive market price.

                                Fannie Mae's innovative First Look marketing period was created to promote homeownership and contribute to neighborhood stabilization — allowing homebuyers to bid and purchase foreclosed properties before they are made available to investors.Details include:First Look is typically the first 15 days a property is listed

Many state and local housing authorities offer financing programs that can assist you with the down payment and purchase of your new home. Additionally, HUD's Neighborhood Stabilization Program (NSP) provides homebuyer funds through special financing programs.Earnest money requirement for individuals using public funds is only $500. Fannie Mae waives the earnest money requirement for public entities using public funds to purchase a Fannie Mae- owned property.Once an offer using NSP funds is accepted, buyers have the opportunity to renegotiate after receiving an NSP required Uniform Residential Appraisal value for the property.The standard closing period for a public funds offer is 45 days, which allows time to fulfill the NSP requirements for funding.

There is also HomePath Financing, which is exclusive to Fannie Mae Listings. HomePath Mortgage allows a buyer to purchase a Fannie Mae-owned property with a 5% down payment (this used to be 3.5% but changed as of November 16, 2013), no lender-requested appraisal and no mortgage insurance. Expanded seller contributions towards closing costs are allowed. Available for owner occupants and investors.

Another type of foreclosure is Freddie Mac homes. The financing and marketing period is basically the same as a Fannie Mae home but it is a different entity.

HUD homes are a different animal all together. The process to purchasing a home is a bidding one, open to owner occupants during the first 15 days of marketing. HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs, Fannie Mae and Freddie Mac will do lender required repairs, often adding to the purchase price of the home. Since the new owner will be responsible for making needed repairs, HUD strongly urges every potential homebuyer to get a professional inspection prior to submitting an offer to purchase.

If you are interested in acquiring a HUD Home that is in need of repair, you may be interested in applying for an FHA 203(k) Rehabilitation Loan. When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. 

You will need an experienced and patient agent to get this through this process, which sometimes can take several months.  Click here to get more information about searching foreclosures.


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