The process of acquiring your dream home can be difficult. Purchasing a new home in a subdivision can be costly, but that doesn’t mean you should lose hope you can own your ideal home. Foreclosed properties are, on the other hand, easy and cheap to acquire. However, you have to evaluate the pros and cons before purchasing one.
What is a foreclosure?
A foreclosure is a legal process that permits a lender to recover the money owed on a loan that has gone into default by taking ownership of the mortgaged property and selling it. The process varies from state to state. However, lenders generally try to work with borrowers on ways to resolve their payment issues and avoid foreclosure.
When a borrower defaults or misses a mortgage payment, the foreclosure process begins. The missed-payment notice is sent by the lender indicating that the month’s payment has not been received. When a borrower misses two payments, a demand letter is sent by the lender. After 90 days of missed payments, a notice of default letter is sent by the lender and the loan is handed over to the lender’s foreclosure department.
Advantages of purchasing a foreclosure
- Low price: Lenders consider foreclosed properties distressed assets and want to dispose of them immediately, making these properties cheap to buy.
- Financing is the same as other types of properties: In most cases you can still use regular financing options such as FHA, VA or conventional financing to purchase.
- Easy transfer of titles: If a foreclosed property doesn’t have a pending court case, the transfer of ownership is done promptly.
Disadvantages of purchasing a foreclosure
- Ownership requires patience: Closing can take several months. After purchase, bringing a foreclosed property to an ideal state takes time and you may need professional help to determine the property’s value.
- You’ll need good credit: Be sure to check with your lender to ensure you’re approved for financing a foreclosed property as it usually requires a high credit score.
- You acquire the property in its current state: This means that you inherit the property’s current problems, including damaged units and illegal occupants.
Talk to a real estate professional
Foreclosed properties have their advantages as well as disadvantages. It is therefore important to seek professional assistance if you are thinking about purchasing a foreclosed property.
At Gateway Realty, we are your partner for everything real estate. Whether you are considering a foreclosed property, interested in the community or are in need of general real estate information, we are here to help. Contact us today!