Regardless of the home you’re purchasing – be it an REO property, a short sale, traditional sale or foreclosure – it’s crucial to get pre-approved for a loan before starting your search. It’s not a requirement, but getting pre-approved will give you an idea of how much house you can afford, which will ensure you don’t find the perfect property, only to find out you can’t truly afford it. Many buyers utilize FHA (Federal Housing Administration) loans, but can those types of loans be used for foreclosures? Read on and we’ll give you the scoop.
FHA-insured loans can be used to purchase a foreclosure as long as the house will be the borrower’s main residence. The FHA prohibits borrowers from using its loan support programs to purchase investment properties. A buyer must move into the home within 60 days of signing the loan documents and remain in the home for the majority of the year.
FHA 203(k) Mortgages:Many foreclosed homes are distressed and in need of repairs. Homes purchased with FHA-insured loans must be considered structurally sound, safe and inhabitable. FHA 203(k) mortgages are popular with homebuyers because they offer the opportunity to finance the purchase of the home as well as any renovation costs. These properties are often attractive to real estate investors who intend to renovate and sell the properties for profit. Buyers using FHA loans can find it difficult to compete with investors with large cash offers due to the simplicity and speed of the transaction compared to FHA-insured financing.
Are you interested in checking out foreclosure properties in Colorado? Contact Metrowest today – our experienced professionals will be happy to show you around!