How To Finance Foreclosures

If you’re thinking about investing in one or more of the many available foreclosed properties now on the market, there are a few things you should consider. Don’t make the assumption that you need a great deal of money to do this, because it isn’t necessarily so. But if you are fortunate enough to be in a great cash position, so much the better. Also, please remember that not every technique suggested would apply to everybody; pick the one(s) that fit your particular cash/credit circumstances.

This being said, there a few things to consider that do apply to everybody that wants to invest in a foreclosed property:

1. Look before you leap: Don’t take unnecessary risks. Inspect each property that you are considering carefully. Check ‘comps’ in the neighborhood to determine the current value of the property. Find out what encumbrances were against the property in addition to the mortgage.
2. Assess the property’s condition: There are some individuals who are so angry about losing their home to foreclosure that they purposely do damage. And you will also want to have some idea what kind of money it will take to restore your investment to rentable or saleable condition prior to financing.

Now, here are some of the things you can consider to finance the property if your coffers are not overflowing with coin of the realm:

1. Assume the existing mortgage loan: This may or may not be feasible depending upon the length and terms of the loan. If it’s an ARM (adjustable rate mortgage) where the interest rate can suddenly escalate to an unmanageable level, don’t even consider it.
2. Borrow from your whole life insurance policy: If it has enough paid-in cash value that you can safely extract, this is a time-proven technique to come up with a sizeable sum when it’s needed.
3. Consider other types of financing: You can take out several smaller loans from different banks, get a home improvement loan, take out a home equity loan or even a Veteran’s Administration loan.
4. Locate a partner: If you have a relative or friend that is dependable, trustworthy and interested, they may agree to join you in this type of investment venture.
5. Other sources: You may be able to secure a brand new mortgage for the property from a bank or finance company that includes paying off any indebtedness for your purchase. Look for a fixed-rate, long-term loan if possible and preferably one that is assumable by credit-worthy buyers.

Of course there are many other creative financing methods that you can use to make an investment in a foreclosure happen. However, the ones shown above are those that are used most often.

Government projections anticipate that there will be as many as 2-million home foreclosures in the United States before the current housing crisis returns to normal. This means that there will be a considerable amount of foreclosure investment opportunities available ahead. It also means that property prices are declining and will continue to do so and that gives you a better chance to buy the property you want at a good price. Keep in mind, however, that you may want to retain the property until prices start back up as they always have after a slump.

Related Posts

• Foreclosures from a Realtors Point of View
• American Foreclosure Symptoms Around the World
• Buyers Guide: Types of Foreclosure Sales
• Foreclosures Adding to the Housing Market
• Attractive Prices for Tax Foreclosures
• About Pre-foreclosures

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