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Get These Questions Answered Before Buying a Foreclosure

With the economy in the state it is, many homes are being foreclosed on. Foreclosures can be a great way to get into a home but you should always get these six questions answered before moving forth with the purchase.

1. Is now a good time to buy a foreclosure?
This tends to be a very common question from both realtors and buyers. Because local market conditions vary, the answer tends to vary.

2. What is the first step buyers need to take?
You should always be preapproved for a loan before you start shopping for a foreclosure. If you are thinking of buying a foreclosure as an investment or a second home, understand that financing the home will be more difficult and more extensive than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.

3. How can you tell a bad foreclosure from a good one?
There are great deals in many markets from all standpoints. However, making a deal can be tricky. Be wary of mortgage debt, construction loans, home equity lines of credit, and possibly a second or third mortgage. Any of all of these obligations could become your responsibility when you purchase a property in foreclosure. Don't fall into the same trap as the previous owner.

4. If I'm a qualifying borrower, can I appeal to banks for better loan terms?
Lenders are drowning in defaults so they may be motivated to cut a deal. If you have a good credit score, many banks will offer you a below-the-market-rate loan on a bank-owned home.

5. What are the costs of buying a foreclosure?
It takes money to make money so the best opportunities are for buyers with cash. Once you've calculated all the expenses, add on another 10 to 15 percent. If you don't build in a "surprise fund" you could wind up being the next foreclosure statistic.

6. How does choice of neighborhood affect foreclosure investments?
If you are looking for a good investment, you should generally avoid neighborhoods overrun with foreclosures. These areas carry the most risk of further depreciation. Look into well-established neighborhoods with good schools and transportation.

 All of these are great questions to get answered before buying a foreclosure from REALTOR Mag.

-Joe

Published Thursday, September 30, 2010 5:59 PM by Joe Prunty

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April 18, 2018 2:38 AM

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