Regardless of the type of property you’re looking for – single-family, condo, short sale, etc. – we always recommend getting pre-approved for a loan prior to starting your search. This helps keep expectations in check and helps you stay in line with a house you can truly afford. The same goes for REO (bank-owned) properties. Here we’ll highlight common financial topics that can come up if you’re considering an REO property.
Interest-only loan:
This type of loan may be ideal if you don’t intend to live in your REO and are buying it as an investment. With this option, you only are only required to pay the loan interest each month, usually for a period of five to 10 years before you must begin paying off the principal.
If you go with this type of loan you’ll pay less initial monthly payments, which allows you to invest saved money into the property. But keep in mind that without careful planning, you could be stuck with high payments and no savings. Also remember your principal won’t go down if you only pay the required installments over the interest-paying period
Credit and mortgage rates:
Your credit history and your intent can also affect mortgage rates. Some lenders may see REO investors—those who don’t live on the property—as a higher loan risk and adjust their rates accordingly.
Assistance:
Some lenders offer mortgages that include money for repairs, such as Fannie Mae’s HomePath loan and an FHA 203(k) loan. Both of these programs are intended to help buyers with fixer-uppers.
Ready to start checking out REO properties in Denver? Give us a shout – Metrowest specializes in distressed properties and we’d love to work with you!