Real Estate Buying Bank Owned
Real estate buying bank owned refers to purchasing properties that have been repossessed by mortgage lenders. Bank owned properties consist of foreclosure real estate that did not sell through public auctions or were held by lenders until market conditions improved and could be sold at a higher price.
Real estate buying bank owned has become a popular strategy amongst real estate investors, home buyers, and business owners looking for cheap commercial properties. Bank owned foreclosures are often priced upwards of 20- to 30-percent below appraised value. Properties are sold directly through each bank's loss mitigation division or their assigned realtors
Buyers who invest in bank owned properties can reap multiple rewards. In addition to discounted pricing, some foreclosure properties qualify for grant money provided the HUDs Neighborhood Stabilization Program or HUDs Section 203(k) program which is part of the Community Reinvestment Act program.
The primary benefit of Section 203(k) is borrowers can obtain a fully-insured mortgage loan which includes additional funds for necessary repairs. When buyers purchase real estate requiring repairs through traditional financing, they must apply for a construction loan which covers the cost of repairs or renovations. Once construction is finished, borrowers refinance the interim construction loan into a permanent home mortgage loan.
Section 203(k) eliminates the need for mortgage refinance, which in turn saves borrowers high interest costs typically associated with construction loans. Bank owned properties must qualify for Section 203(k) criteria.
Obtaining Section 203(k) approval can take a bit longer than applying for a traditional loan. However, buyers who need extra money for renovating foreclosure homes may find this option quite beneficial and will actually save time and money in the long run. Eligibility requirements and lending criteria regarding this program is available at FreddieMac.com.
NSP grants fall under the American Recovery and Reinvestment Act which focuses on rebuilding neighborhoods that have endured financial hardship due to an overabundance of foreclosed homes. Each state receives allocated funds which can be provided to recipients to purchase, rehab, and resell foreclosed properties. NSP grant monies must be used to according to HUD guidelines.
Another option for buying bank owned real estate below market value is through Fannie Mae's Home Path Mortgage program. In addition to offering discount prices, Home Path offers low down payment requirements and special financing options to qualified buyers.
One unique feature of Home Path Mortgage is borrowers are allowed to use down payment funds derived from outside sources. Down payment assistance can be obtained from family, friends, or charitable organizations and cash can be provided as a gift or loan.
Oftentimes, buying bank owned foreclosure properties provide buyers with instant home equity. Much depends on the type of real estate and purchase price. By holding the property for five or more years, borrowers can borrow against home equity by taking out a home equity loan or home equity line of credit. Funds can be used to make home improvements, pay off high-interest loans, or invest in real estate or financial products.
As with any type of real estate purchase, buyers should conduct due diligence when buying bank owned properties. Obtain professional real estate appraisals and home inspections. Review comparable sales reports to determine prices of homes sold in the area within the previous six months.
A variety of real estate financing options exists for buyers of bank foreclosures. In order to maximize the return on investment, spend time comparing mortgage lenders, interest rates, and closing costs.
Begin your home buying research by browsing our real estate buying bank owned article library. We offer information and resources to help visitors make informed choices, locate grant money and special financing options, as well as what to look for when investing in foreclosure real estate.
Published on August 09, 2010 at 02:45 AM