In housing markets when inventory is limited, many buyers consider foreclosure or REO (bank-owned) properties. The process for buying these types of homes isn’t all that different than traditional sales and you can often times find properties for below market value. But what about the down payment? Here we’ll give you the breakdown of what you’ll need to put down for a foreclosure or REO property.
Conventional Financing:
Conventional loans typically require 5 percent to 20 percent down. Low- to moderate-income borrowers may qualify for a loan with less than 5 percent down, such as Fannie Mae’s MyCommunityMortgage program. MyCommunity requires no down payment, in some cases, to 3 percent down. Standards for property condition vary, but basically the foreclosure must be livable, with no major electrical, plumbing or structural flaws.
Government Backed Financing:
The FHA (Federal Housing Administration) and VA (Departments of Veteran’s Affairs) guarantee lenders reimbursement in the event that the borrower defaults. The FHA requires 3.5 percent and the VA does not require any money down from its exclusively military borrowers. Because of this, the property conditions guidelines are more stringent. The FHA and VA require foreclosures to pass an interior and exterior inspection prior to closing. Additionally, anything affecting safety, structural integrity or health must be repaired before the borrower can get the loan.
Ready to start checking out foreclosures or REO properties in the Denver-area? Give Metrowest a shout – our experienced pros would love to show you around!