How to Buy Foreclosed Home With no Money Down?
Many potential homebuyers wonder how much they’ll need to save in order to get a mortgage. But did you know it’s possible to buy a home without a down payment? Buyers possess the creditworthiness to take out a home loan but don’t have access to the savings needed to show interest in the buy foreclosed property.
This guide serves as an introduction to the foreclosure market, the pros and cons of buying a foreclosed home, and how to take advantage of buying a foreclosed house with no money down. We’ll take a look at some options you have when you want to buy a home without a down payment. We’ll also show you a few alternatives for low downpayment loans.
What is the Difference Between a New Home and a Foreclosed Home?
When you search home listings online, looking for properties, you have numerous options. You can choose brand new homes sold by realtors, residences for sale by owners, and foreclosed homes. Let’s review the difference for each listing type.
New Homes
A newly built home often has had no previous owners. The house built to the customer’s specifications or is part of a neighborhood of similar-looking houses. New homes sold by realtors focus heavily on the features of the properties. To purchase a new house, a down payment is required, and financing is secured through a lender to cover the entire cost of the property. A mortgage usually is acquired, and monthly payments are made directly to the bank or financial institution where the loan exists.
For Sale by Owner Homes
Houses for sale that a real estate agent doesn’t list are known for sale by owner properties. The owners have chosen to list the homes themselves by advertising them online and in the local newspaper. The responsibility of locating the right buyer lies with the seller who doesn’t pay a realtor a commission for helping them sell their house. It’s a riskier process that can take a long time to complete.
Foreclosed Home
The foreclosure process takes place when the homeowner fails to pay the lender. From a legal perspective, they forfeit their rights to the process legally. The owner must come up with the remainder of the outstanding debt or complete a short sale to prevent the foreclosed home from being bought by another person.
Here’s What You Need to Do to Buy a Foreclosed House with No Money Down
There are four things you can do to increase your chances of buying a foreclosed house without a down payment. They are:
- Consider Buying FHA Foreclosures. Uninsured (UI) foreclosures are in the questionable condition physically. They’re often known as fixer-uppers. You can purchase them for very little but need to put time and money into making them habitable. When buying this type of foreclosure, houses are often sold sight unseen. There is a risk to purchasing homes that way, but it can be well worth the time and effort to fix and even flip these homes if you’re are inclined to do so.
- Home Possible® Loans From Freddie Mac. You may also want to consider a Home Possible® loan from Freddie Mac if you have low to moderate-income compared to others in your area. Home Possible® loans allow you to buy a home with a 3% down payment and lower mortgage insurance options.
- Acquire an FHA Loan. Not everyone who applies for this type of loan will receive it. First-time homeowners are more likely to get accepted, though. Anyone wanting to invest in a fixer-upper may qualify for a renovation loan. They don’t need to put any money down to purchase the property and instead focus their time, finances, and energy on renovating it.
- VA Loans. You may qualify for a VA loan if you’re an active-duty service member, member of the National Guard, veteran, or the spouse of a deceased veteran. VA loans are backed by the Department of Veterans Affairs and are another option if you want to buy a home with no down payment.
The Importance of a Home Inspection
Many buyers face bidding wars for limited housing stock. A growing number of home buyers are opting to forgo home inspections in order to make their offers appear hassle-free. A standard home inspection can increase your confidence about a foreclosed property’s condition before signing on the dotted line. Getting a professional opinion also allows you to negotiate repairs with the bank or back away entirely from buying a property with major or structural issues.
