Do I need a big down payment to buy an REO property?

House InsuranceIn 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!

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.

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