Do I have to Use Cash to Buy a Distressed Property?

Many people are wary of purchasing distressed properties because they think they have to pay in cash. However, that’s not always the case. Here we’ll explore non-cash financing options for different types of distressed housing that makes purchasing this type of property much more manageable.

  1. Buying a real estate owned (REO) home with a conventional loan
    While foreclosure homes sold at auction are often in terrible shape, REO properties that are basically livable, even if they need sprucing up. And they can be purchased using a conventional mortgage from a bank, credit union or mortgage lender. As with regular houses, lenders evaluate the borrower’s credit, income and ability to repay the loan according to underwriting standards set by government-backed mortgage giants Fannie Mae and Freddie Mac.
  2. Buying a foreclosure with a renovation loan
    If a foreclosed home needs an extensive amount of work, you can finance it with a renovation mortgage that wraps the purchase price plus the construction cost into a single loan. One popular program is Fannie Mae’s HomeStyle Renovation mortgage. To qualify, you generally need a healthy credit score of at least 620. Borrowers with excellent credit and high income may be allowed to put down as little as 5% of the purchase price. The funds can be used for any type of renovation, as long as it is permanently attached to the house and can be completed within 12 months.
  3. Using an FHA loan to buy a bank-owned house
    For people with less-than-perfect credit, Federal Housing Administration loans may be the best bet. Government-backed FHA loans are intended to help owner-occupants. They are not meant for investors or house-flippers. FHA loans can be used to buy almost any type of home, including bank-owned homes and short sales. Thanks to federal backing, FHA-approved mortgage lenders are willing to provide more flexible underwriting and accept smaller down payments. The minimum credit score requirement is 500, for a mortgage with a down payment of 10%. With a score of 580 or higher, you may be able to put the minimum 3.5% down.

Regardless of how you pay, the first thing you want to do if you’re considering a distressed property is to find a real estate agent experienced with these types of sales. At Metrowest, we specialize in these types of transactions. Give us a shout today – we’d love to help you start the process!

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

Get More Real Estate Market Info... Subscribe Below!

Learn more about us and find other resources on buying investment properties with us. Like us, follow us, connect!

No comments yet.

Leave a Reply