Almost everyone has heard of buying a foreclosed home. The opportunity for instant equity is tremendous. I just read a letter from Frank. I'll take you to his letter in a moment because he did his homework.
But for right now here are his two questions...
Question: Will the lender use the appraisal of the county as the property value, which in my case would help towards a good LTV?
Answer: The rule of thumb that establishes value for a home mortgage is purchase price or appraised value whichever is less.
For example, if a sales price is $200,000 but the real estate appraiser returns a value at $175,000, the home mortgage will be figured off of $175,000.
Conversely, an agreed upon price of $200,000 will be the basis for the lender's calculations even though it appraises for $250,000.
I have seen exceptions to this rule of thumb so consult your lender. You can also ask about using the county assessment instead of paying for a market appraisal.
Question: Are there any other surprises that I may be overlooking?
Answer: Eliminate surprise with mortgage approval. Ordinarily I encourage mortgage pre approval. But due to non-refundable nature of down payments following an auction, I would get mortgage approval subject only to appraisal and title insurance.
Consider going one step further. Ask your home mortgage lender if mortgage interest rate lock is available before the auction too.
The point is to reduce as much risk as possible since your down payment might be non-refundable.
Have you found yourself asking...
Good questions! Now let's get you answers! The first step to learning about your local market starts with interviewing real estate agents. Next you want to form a dream team of real estate pros who work on your behalf.
Discover the key professionals who will be involved in your real estate transaction whether you buy a primary home or rental property.
For more of Kate's unique home buying help, go to Residential Construction Loans Explained.
What if you could ask a mortgage insider about buying a foreclosed home? Now you can!
Ask Kate is specifically designed to answer your questions and create dialog.
You'll also find a wealth of information at Kate's Best Mortgage Rate Blog packed with the latest additions to this website, interest rate updates, and a fresh approach to affordable homeownership.
See the letter from Frank inspiring this page at Buying a Home in Foreclosure.
Haven't found what you're looking for? Here's the solution! Go ahead and Ask Kate for answers.
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