With low home prices and an abundance of foreclosed properties for sale, first-time home buyers might do well to find out what is available in their areas.
First-timers are in a unique position to purchase foreclosures, for two reasons.
The first is that few if any lenders will accept a contract on a foreclosure from a borrower who has another home to sell.
The second reason is that first-timers can most likely stay where they are while going through the drawn-out process of purchasing a foreclosed property. Some borrowers might wait weeks to even hear if an offer they have placed on a property has been accepted.
First Steps for First-Timers
To start the process, as a borrower, you should get yourself prequalified, so you know what you can afford. You should then find yourself a good real estate agent who knows the ins and outs of foreclosures, preferably one who does a lot of these transactions.
Having a real estate attorney review the documents is also a very good idea.
To obtain traditional financing (conventional or FHA) the property must be habitable – which means it has functioning water, electricity, heat, etc. – but may be missing things such as a stove and a dishwasher. These items are considered separate from the property itself.
FHA 203(k) Financing
For properties that need a bit more work or are sold as-is, look into the FHA 203(k) program.
This two-in-one loan covers the cost of the property and some of the repairs that it might need. The loan amount is based on the anticipated appraised value once the repairs are made.|
This program covers one- to four-unit buildings and is for borrowers who intend to live at the property, meaning that investors would be excluded from the program.