No matter if you’re purchasing an REO (bank owned) property, a traditional listing, a short sale, or any other kind of transaction, it’s very important to get pre-approved for a loan before starting your search. Though not required, getting pre-approved will give you an accurate 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. One of the most common loan types is from the FHA (Federal Housing Administration), but can those be used to purchase foreclosure home? Absolutely. Read on for the full story.
As long as you intend to for a foreclosure home to be your main residence, FHA-insured loans can be used to purchase this type of property. What you can’t do is utilize an FHA loan to purchase an investment property. 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 home buyers 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.
Despite their name, distressed properties can be a great value and make a great option for those looking to break into homeownership. That is if you have the right team on your side. Metrowest specializes in distressed sales and we’d love to show you what Denver has to offer. Give us a shout!