Buying A Foreclosure Home
by JG from New Jersey USA
Ask Kate: Buying A Foreclosure Home Hi Kate - Great site! I am looking to upgrade our current home and purchase a newer home. I am looking at a foreclosure. I understand there are numerous considerations in buying a bank owned foreclosure.
Without the risk of selling my current home and being without a place for my family to live in case the deal falls through, I think the only way to do this is to carry 2 different mortgages.
I won't sell my first home until I close on the new purchase. Then I'll refinance its mortgage, an FHA jumbo as I have a minimal downpayment of 3.5%, with a nice downpayment using the proceeds from the sale of my first home. But this seems like a ton of additional expenses, closing costs, etc.
I also heard of a bridge loan. Are there other options when people want to buy a new home but are dependent upon selling their current one?
Kate Answers: Buying A Foreclosure Home
Hi JG, Yep bridge loans were the ultimate answer when real estate equity was building faster than an ant hill. We originated the short term loan to transfer equity from the first house to the new house with little cost to the homeowner/home buyer.
Another solution over the years has been the 1st/2nd mortgage combo on the new house. When the first house sold, the 2nd mortgage belonging to the new house was also paid off leaving the homeowner/home buyer with affordable 1st mortgage payments.
However the credit crunch and resulting real estate value decline has put a crimp in these economical lending programs.
Family Solutions For Buying A Foreclosure Home
So instead have you thought of proceeding to sell your first house while buying a foreclosure home. If the second home does not close before the sale of your current house, plan on securing a month-to-month rental for a temporary home.
Weigh the difference in price of moving your family twice versus closing costs incurred by the refinance. I admit, moving a household is as thrilling to me as enduring a root canal (apologies again to my Dentist for that comparison) but you'd avoid the cost of refinancing.
JG, best wishes in buying a foreclosure home. I hope you'll return often to Get-Your-Best-Mortgage-Rate as I am adding new information daily.
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