Tips For Buying a Foreclosed Home

Homebuyers in the market for a deal on their dream home need two things: lots of patience and the stomach to do battle with investors. Any home that is in a decent area and priced right is facing keen competition in today's market. Homebuyers in the market for a foreclosure need those qualities tenfold. Buying a foreclosure is a lengthy process, and, although most investors prefer pre-foreclosure sales and auctions, you will face your share of competition for bank-owned homes. Let's take a look at some foreclosure-buying options and how to participate.

Buying a Foreclosure at Auction

• Homes that are sold at auction, typically carried out at the county courthouse, are those that homeowners have lost because they failed to bring the mortgage current during the reinstatement period.

• The lender's representative, known as the trustee, will be on hand to receive the money from the winning bidder, if there is one. The opening bid is typically equal to the loan balance, trustee's fees, accrued interest and other costs incurred by the lender during the foreclosure process.

• Can you get a bargain at auction? That depends on how much the homeowner owed before defaulting on the loan. The opening bid must be met or the trustee purchases the property and it then becomes an REO, or "real estate owned" by the lender.

• You may have seen foreclosure auction shows on TV. If so, you know it isn't the place for a novice to get a good deal. Most of the bidders are highly experienced flippers and investors offering up fierce competition.

• You will also not be able to view the inside of the home or perform inspections. Plus, if you're the winning bidder, you may have to evict the current occupants. Depending on the state in which you live, eviction may be costly and time-consuming.

• Finally, many foreclosures have additional liens against them, which you will take on if you purchase the property. Recorded liens are public information; you can search for them at the county clerk's office, the county recorder or the assessor's office. But not all liens are recorded.

• One way to ensure you're protected is by purchasing an owner's title insurance policy.

Buying an REO

• Purchasing a bank-owned property is much easier than buying a home at auction and much like a conventional purchase.

• You'll need a loan preapproval letter from your lender, unless you're paying cash, and the services of a real estate agent.

• Most REO properties are vacant and somewhat cleaned up. Although the bank won't supply you with property disclosures as sellers in a conventional transaction are required to, you will be allowed time for inspections.

• Many experienced REO buyers perform extreme due diligence, such as checking the city planning office for permits that may be on file for any work the previous owner performed. Have anything that looks the slightest bit suspicious inspected, from the roof to the foundation.

• Your buyer's agent should be able to assist you in learning as much as possible about the home's history. And, since real estate brokers are required to hold on to transaction files for a number of years (varying according to state), if the home sold in the past few years, your agent may be able to track down a past disclosure.

• Banks typically don't pay for repairs to the property and other transaction fees, so you'll need to take on those expenses. Ultimately, although it may seem that you're getting a bargain-priced home, once all is said and done, it may be worth it to purchase another home in better condition.

Contact Katie Oakes to start your home search today or to learn more about the process of purchasing a foreclosed home. All information and services are provided by Katie Oakes with The Champagne Realty Group at Keller Williams Premiere Properties in Glen Ellyn, IL. Servicing Wheaton, Glen Ellyn, Winfield and the greater DuPage County area with over 130 million in closed sales volume.

The Advantages of Getting a Mortgage Preapproval

The homebuying process can be exciting, but also stressful. When there are a large number of buyers in the market for real estate, the odds of being able to purchase your desired home can be low. However, getting a mortgage preapproval prior to home shopping can dramatically increase the odds of success. 

Make Mortgage Preapproval Your First Step

A mortgage preapproval should be a homebuyer's first step when purchasing a home. A borrower can choose to meet with a lender or get an initial preapproval via the Internet. The preapproval process is similar to the actual mortgage process and will, in fact, eliminate a lot of time after a home has been chosen.

When obtaining a mortgage preapproval, the borrower will complete a mortgage application and submit the necessary documentation to the lender. The lender will pull a credit report and examine the borrower's credit.

Based on all of this information, the lender will determine the amount of funds that the borrower qualifies for. The borrower will receive a Conditional Commitment, which states the amount of funds that the lender agrees to lend provided that the conditions are met. While a preapproval is an important first step, it is not the final mortgage approval.

Impress Homesellers With Your Mortgage Preapproval

One of the advantages of having a preapproval is that this letter can be shown to real estate agents and sellers when looking for a home. By doing so, both the agent and the seller know that the borrower can qualify for a certain amount of funds. It is proof of the borrower's financial standing and ability to proceed with the home purchase.

Another advantage is that some of the work that is involved in obtaining a mortgage is already done. The lender has already examined the borrower's financial situation, including credit, income and assets. During the preapproval process, the lender will also discuss the most appropriate type of mortgage program that fits the borrower's needs, whether it is a conventional loan or a government loan.

This is significant because not all sellers will accept a buyer who is using a government loan. Knowing the details of what type of loan is appropriate for the borrower, the agent can then show them homes that will fit their preapproval both for cost and type of funding.

How Mortgage Preapproval is Determined

The preapproval is determined by putting the information given to the lender through automated underwriting. In most cases, the preliminary loan file goes through a preprocessing before the preapproval is given to the borrower. Since there is an actual examination of the borrower's documentation, the borrower will also receive a list of additional information that may be needed. The borrower can then submit this information while shopping for a home.

Once a home is found and the sales contract is signed, processing the loan is faster since most of the work for the credit file has been done. The final process involves verifications, ordering and receiving the appraisal, ordering title documents, obtaining insurance, etc. The final underwriting is the last step before the loan file is sent for closing.

The preapproval process is an important part of a home purchase. Since there is a lot of information involved in obtaining a mortgage, it eliminates many last minute problems that can arise. Obtaining a mortgage preapproval helps the home purchase process go smoothly.

Information and service provided by Katie Oakes with The Champagne Group at Keller Williams Premiere Properties in Glen Ellyn, IL. 

To start your home search now or for local lender recommendations contact Katie Oakes directly!