The number of people unable to fulfill their mortgage obligation is at an all-time high, making purchasing a home at a reasonable price easier than ever. Here are this week’s tips on how to go about purchasing a foreclosed property.
This week, we’re taking a look at financing a foreclosed property.
To buy a foreclosure, you need to secure your money in advance regardless of whether you use a lender or resources from other mortgage products and investors, a line of credit (home equity), or cash. Those selling foreclosed properties are generally only interested in working with serious buyers – those who want to buy quickly and are ready to do so with financial resources already in place.
These are some tips to get you started:
- Figure out how much you can afford; this will depend on how much cash you have and the amount your lender is able and willing to loan you, which is based on your income and credit score as well as some other factors. Using a mortgage calculator is a great way to find out what amount you can pay each month.
- You can also use one of these two rules of thumb:
- The cost of a home you can afford is 2.5 times your gross annual income
- The principle and interest payments you make each month should be the equivalent of 1/3 of your take-home pay or 1/4 of your gross pay.
- There are lenders who do not finance foreclosed properties; you might need to speak with a few different lenders to find out which ones do.
- Be sure to work with a lender who understands the process of buying a foreclosure, one who will guide you all the way. To get a sense for that, you might want to ask how many foreclosure purchases they’ve been involved in.
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