Beginner Investor - Foreclosure Questions
Hello! A friend and I are going to invest in a foreclosed house, I’m currently a newbie and I’m still researching but am still unclear of the process. We have never owned a home, currently have car payments and credit scores around 600… I have a few questions to ask about the foreclosure process, I just don’t want to get burned trying to get my foot in the door.
If we plan on buy a foreclosed house that is going for $80,000 – as listed, but is assessed for $100,000, could you give me an idea on how much the downpay and closing costs would be? My friend stated about $5k (general figures for the house amt) Is it possible to have no downpay and only pay for the closing costs?
What type of loan should we go for since this is for investment purposes?
To my knowledge, we need to Pre-qualify for the loan, can this done for over the amt of the house? IE, house is $80k, can we get $90k pre-qualify and use it all on the cost of the house?
After we pre-qualify – we select a house we would like to purchase, and then have an appraisal done to the house, correct? I’m a little foggy on what happens afterwards… can anyone lend their advise? It is greatly appreciated for any help!
Thanks for the reply! I’m living in Texas. I’m not sure of the purchasing method… REO is probably it, I was looking at some properties listed off ****Must participate a while before posting URL's***, do you have any suggestions as to elsewhere to look for foreclosures?
Should I contact a local agent to see if I can pre-qualify for a foreclosure?
You need to speak with a mortgage person to pre-qualify for a mortgage. I would suggest a "pre-approval" that only requires that you get an appraisal. The banks want a 30 day or less close date
Being a mortgage broker I may be able to answer your questions. From the sounds of it your question isnt really about purchasing a foreclosed home but more about qualifying for a loan. First of all yes you can do 100% financing with that credit score as long as the bank believes it is going to be your first or second home. Im not going to lie your options are somewhat limited if you are under a 600 middle credit score about the lowest I have seen a lender do 100% financing is with a 580 middle score.
In a few (very few) if you are purchasing an REO the bank may lend you the money if they want to get rid of the property badly enough.
The only way you can get an approval for more than the purchase price is through a hard money lender. Hard money lenders approve based on the equity position in which you are in on the property with minimal focus on your credit but they will give you only 70 to 75 percent of the after repaired value on a property.
For example you find a 100 thou house for 50 thou you get approved for a 65 thou loan 10 in cash which is held in escrow for repairs the rest for closing cost you come up with zero out of pocket
A standard lender uses the purchase price as the value of the property not the appraisal so you cannot get approved for more than what you are purchasing the home for.
With better credit there are 103% and 107% programs out there...
Hope I helped some