Monthly Archives: March 2011

Buy Foreclosed Home and Save Money

Ten years ago, home markets were in a rage, and prices were skyrocketing as buyers struggled to keep pace with the sellers market. However, now that the economy has shifted, and many people have lost their homes to foreclosure, the market has spiraled downwards into a severe buyers market. The only problem now is that though houses are easy to find, finding getting loans is becoming a problem.

The best way to be assured that you can qualify for a home loan and get through the closing process is to buy a home with plenty of equity, and if you can, pay a sizable down payment of 20% or more.

The second part I can’t help you with today, but the first, that’s where the real magic happens. Banks are having to take houses back left and right, which means they’re in over their eyeballs with property they don’t want to manage. So how do you find a good deal on a home? You buy foreclosed home and save money that way!

To buy a foreclosed home, you can check your local newspaper for a weekly list of auctions, or you can hire an agent to bird dog for you. Either way works, but you’ll have to be fast because real estate investors are aware of the same tricks, which is how they make so much money flipping homes.

That being said, if you are patient enough, you should be able to get your hands on a home with at least 10-20% equity, which is perfect for getting a mortgage loan.

Since most investors won’t touch homes with less than 30-40% equity, the only real competition you’ll have is other home buyers looking to buy a foreclosed home and save money.

One precaution though, when buying a foreclosed home, is to make sure that you have a full inspection done. Even though the banks will usually only sell homes “as-is,” it’s important that you know what you’re getting into. Being armed with an inspection will help you evaluate the risk against the deal to see if it’s worth your time. Also, some FHA loans won’t be approved unless the home is in good condition, so you might have to put a bit of work into the property before the loan goes through.

Still, with a little bit of due diligence and hard work, buying a foreclosed home is a wonderful shortcut to being a new home owner.

Home Loans for Bad Credit

Having bad credit is frustrating because you can’t repair it without getting new credit or playing the seven year waiting game so things will drop off your report, which is fine if you don’t need credit, but horrible if you need a loan to buy something, such as a house.

Though home loans for bad credit do exist, post-mortgage crisis, at least in the United States, they are becoming increasingly difficult to acquire, mostly because banks and lending institutions are still a little skittish.

The best place to start is by sitting down with your bank, in person if you can, and going over your credit report line by line. They’ll be blunt and tell you what you’ll need to do in order to have a chance at making it through the approval process. Though this can be intimidating, and even quite depressing, it’s going to help you find places where you can make a quick fix to help you better your chances.

From here, you can start your search, starting with the most familiar names, and moving into other “speciality” finance companies as prospects start to dwindle.

If you’re an armed forces veteran, then you have a bit better chance of getting a home loan, even with bad credit, as a VA loan will at least guarantee a portion of the mortgage value. However, you’ll still need decent credit to get approved.

Another way to better your chances is to save up a sizable down payment, at least 20%, which you can use to increase the amount of equity you’ll have. If you can get a good deal on a house, and walk in with at least 25-40% equity, then a bank will have a much greater chance of considering the risk and giving you a loan.

Obviously, we’re talking large amounts of money here, so this isn’t an option for everyone.

The most important thing to watch when getting home loans for bad credit is the interest rate. It’s absolutely not worth buying if you pay more than 10% interest, and to be fair, even 6% is high these days. If that’s your only option, then I recommend that you keep renting, keep working on the credit, and try again when you can get a rate below 10%. On a loan of 100k, every single percentage point makes a big difference in both monthly payment, and total loan cost.