As a homebuyer considering a foreclosure purchase in innerloop Houston, Bellaire, West University, Katy, Pasadena, Cypress Fairbanks or any Greater Houston Neighborhood it is important to understand the finance process. There are many lenders to choose from offering a variety of finance programs at different interest rates. If financing is going to be used for the purchase of a property, it is best to secure the financing in advance.
As foreclosure specialists the Man-Edge team is there to guide you along the way to home ownership. Following is a guide to financing a foreclosure home.
1. Find Financing
The first thing a seller wants to know about a buyer is if they have arranged for the money to purchase the home. If you do not have a pre-approval letter or a proof of funds to submit with your offer, the offer will not be considered by the seller. The buyers who are successful are ready to pull the trigger the minute they see a great deal.
2. Find out how much home you can afford.
The amount of home you can afford depends upon your income, savings, monthly expenses, and debt. These factors will determine the amount of money a lender is willing to loan you. You also need to consider loan interest rates.
3. Look for the best mortgage
Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage—whether it’s a home purchase, a refinancing, or a home equity loan—is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.
4. Choosing the right mortgage for you
A loan made with real estate as security and not involving government participation for insurance or guarantee.
- Not subject to the more stringent FHA and VA regulations
- Down payment varies by credit score
- The most common down payment is 10% for owner occupants, and 20% for investors
- Closing costs vary
- Private Mortgage Insurance is higher than that of FHA
- Loans are subject to institutional regulations
Now an agency within HUD, the Federal Housing Administration was established in 1934 to advance opportunities for Americans to own homes. By providing private lenders with mortgage insurance, the FHA gives them the security they need to lend to first-time buyers who might not be able to qualify for conventional loans.
- Minimum down payment of 3.5%
- Closing costs are low regulated by HUD
- Private Mortgage Insurance Premiums are low
- Flexible guidelines
- Limited Lenders Fees
- Maximum loan Amount
VA financing is available to over 29 million veterans and service personnel, in most cases a house can be purchased with no money down. Financing can be approved for up to $203,000 and there is no monthly mortgage insurance premium to pay. Additional benefits include traditional, Guaranteed Payment and Growing Equity repayment options.
- No down payment in most cases
- No monthly mortgage insurance premiums
- Limitation on buyers closing costs
- VA performs loan servicing
Loan maximum may be up to 100 percent of the VA-established reasonable value of the property.
5. Hard money Loans can serve as interim financing.
These loans are backed by the value of the property rather than the credit score of the buyer. The loan is typically used for short periods of time. A buyer could buy a property, fix it up and sell it. Pay off the loan and pocket what is left. The lender will typically loan a percent of the ARV (after repaired value of the home). For example you find a home selling for $60,000. This home should bring $100,000 when repairs have been made. You have $12,000 which could be used for a 20% down payment. With a hard money loan the lender loans you the $60,000. You spend your $12,000 on supplies as you make repairs to the home. When the home is complete you list it for $100,000, sell it and pay the loan off. Hard money loans will have high interest rates, which can vary from 12% to 20%.
6. Loans with a repair escrow
Streamlined 203(k)Limited Repair Program
The FHA offers the 203K loan. The “Streamline (K)” Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.
HomePath® Renovation Mortgage Financing
Available only on homes you make your primary residence and offers these benefits:
• Financing to fund both your purchase and light renovation
• Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
• No mortgage insurance*
• HomePath Renovation Mortgage financing is available from several lenders.
Call Bill Edge at 713-240-2949 to see Houston homes in 24 hours or less