Tips for Buying a Home in Foreclosure

If you are looking for an investment home, you might be interested in picking up a home that is in foreclosure. While buying a home that is in foreclosure can certainly be a great way to make some extra money, there are a few things you should keep in mind before moving forward. In this way, you can ensure the process is as smooth as possible for everyone involved.

Know Your State Laws and Regulations

When it comes to foreclosure, the proceedings vary from state to state. Therefore, even if you have purchased a home in foreclosure in the past, that doesn’t mean the proceedings will be the same if you are considering a purchase in another state. Similarly, if you are looking for homes for sale by owner on an MLS listing, keep in mind that the proceedings may be different on a home in a different state from where you live.

In some states, it is possible for homeowners to stay in a home for up to a year while going through foreclosure. This is particularly true in states where the mortgage system is used. In those where trust deeds are used, on the other hand, the owner may have only about four months before he or she has to vacate the premises.

Understand the Period of Redemption

Don’t get too excited about a purchase until the sale is finalized. Nearly every state allows the homeowner to enjoy a period of redemption. This means the owner has the right to take care of the financial default, which includes paying all of the costs of the foreclosure as well as paying back the missed principal payments and back interest. If the homeowner manages to accomplish this within the state’s designated timeframe, he or she can regain control of the home. Although this doesn’t happen often, it is possible. In order to gain a better understanding of how this works in your state, it is best to consult with a real estate lawyer.

Make Certain You Can Handle the Emotional Stress

When considering investing in a foreclosure, many people fail to think about the fate of the homeowner. More than likely, however, you will come face to face with the homeowner and the family that is losing its home. This is particularly true when it comes to homes that are for sale by owner. For many people, meeting those people that are losing their home can be quite upsetting and uncomfortable. Therefore, be certain you are mentally and emotionally prepared for this situation before you get started in the purchase process.

Homes go into foreclosure for many reasons. In some cases, the homeowner may have been laid off, fired, or unable to work due to medical problems. Others may have buried themselves in a debt they were unable to repay while others may be going through major life changes, such as divorce or the death of a loved one. These situations can be quite heartbreaking and can make an investor feel guilty about the purchase. At the same time, you may be helping the homeowner get out from beneath a burden that he or she can no longer carry. In that case, it can be a win-win situation for everyone involved.


About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.electronicappraiser.com/, which is a leading provider of home appraisals that offers a nationwide personalized instant informational report about house values. For more information, please visit www.electronicappraiser.com .

Why Get Pre-approved for a Mortgage?

Imagine the scenario. Months into your grueling house search, you have finally found The One. The location is right and the home and property fulfill your wish list to a T. You have already unpacked your boxes and stretched out on your expansive deck…in your imagination. The only thing standing between you and your dream home is the paperwork. And you’ve already pre-qualified for a mortgage, how hard could it be? All the stars are aligned and it’s time to make an offer.

Not so fast. Another family has already begun envisioning their own version of life in your dream home. Dad is grilling steaks on your dream deck while the family dog pounces through your beautiful kitchen. The only difference between yourself and the competing buyer? The other family has been pre-approved for a home loan, and places an offer on the home right away.

The difference between being “pre-qualified” and “pre-approved” warrants clarification. First, it is important to understand that neither being pre-qualified or pre-approved guarantees financing for a home. Pre-qualification means that someone, perhaps your real estate agent or lender, has informally taken a look at your finances and deemed that you are likely a good candidate to qualify for a home loan of a certain amount. Bear in mind that pre-qualification is based on information you provide that has not been verified, and in no way guarantees that you will actually qualify for a loan in the amount specified. So if you are not guaranteed financing based on the amount for which you pre-qualify, of what use is being pre-qualified? Getting pre-qualified can be a good start for home buyers who have no idea of what price range they can afford. Having a general idea of the loan amount for which a home buyer may qualify helps real estate agents and home seekers narrow down the pool of potential properties significantly.

Getting pre-approved for a home loan takes the process a step further, and will give you a more accurate number to work with during your home search. Your credit report and income will be reviewed before you are pre-approved, giving the lender a more accurate impression of your financial status as compared to your word alone. Believe it or not, it is not uncommon for potential home buyers to stretch the truth about their financial status in order to be pre-qualified for a larger amount. Doing so only leads to wasted time and money looking at homes that are economically unfeasible, an undesirable scenario for all parties involved.

Shopping for a home is often a long, involved process. The last thing you want when you finally discover the home you want to purchase is to lose it to another, more prepared buyer. Being pre-approved gives you information about the maximum loan amount for which you will likely be approved, as well as the interest rate you can expect. Knowing a maximum loan amount and your probable interest rate allows you to calculate with more accuracy what your monthly mortgage payment would be for a particular home, a major factor in determining what home you can comfortably afford. Being pre-approved for a home loan can give you advantages in negotiation as well; sellers may be more inclined to accept your offer because of reduced uncertainty, and you may be able act quicker than another buyer since several steps of your application process have already been completed.

About the Author: Greg Sullivan is the President of www.electronicappraiser.com, a leading provider of home appraisals offering a nationwide personalized instant information about house values. For more information, please visit www.electronicappraiser.com.