View-Foreclosure-Homes.com has compiled a short checklist that will help you navigate the process of purchasing an affordable foreclosure property. Whether this is an investment property or for your personal residence these steps will be required throughout the purchase process. Take a minute to work through this handy guide so your properly prepared to purchase your next foreclosure property.
1. PULL A RECENT COPY OF YOUR CREDIT REPORT
To have a chance of putting in timely offers on foreclosed homes, you have to have a good credit score. It is a bit of a dilemma, however, because standard checking of your credit score lowers it by a few points, and when it comes to being approved for mortgages or other large loans, those few points could make the difference. Many banks and other entities offer identity protection for a nominal fee every month. These products generally offer free credit monitoring as part of their suite of services. Most of these identity protection products don't come with contracts, either, so you can sign up, get your credit information, and then cancel the product to save the $8-$15 a month. Once you have your credit score in hand, off you go on your adventure in buying foreclosures!
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2. SEARCH OUR VAST DATABASE OF FORECLOSED HOMES IN YOUR AREA
Usually, you look for foreclosed homes to find the home you want. They're helpfully clustered under the name of the real estate broker who is administering the deals. With foreclosures, however, it's usually more fruitful to search brokers who are known for dealing with these transactions. Not only will these brokers have the deals you seek, but they also have the knowledge to help you with how to buy foreclosed homes. The correct term for the properties you want is REO, which stands for "real-estate owned." This means the homes in question are the "good deals" upon which the lenders have foreclosed. When it comes to buying foreclosures, buyers usually deal with brokers directly instead of a broker and an agent. This is attractive to the customer because that person doesn't have to pay two sets of fees, and it is attractive to the broker because that person doesn't have to share the commission with an agent. Such brokers who double as agents also usually have well-cultivated relationships with various banks, and that means that they can come across juicy listings even before they hit the REO list. If you have a good relationship with such a broker, you can score your new home before the competition knows it was up-for-sale. When it comes to how to buy foreclosures, one of the most crucial aspects of success is knowing how much comparable homes, or "comps," sell for as foreclosures. For example, let's say you want to buy a home that is up for $150,000. Looking at it, you see a bunch of repairs needed. You may want to tell the broker that you want to knock off 10 grand because of the repairs, but if there are 20 other "comps" in the area that already sold for $150,000, you will likely lose the home to someone else if you try to haggle about repairs. On the other side of the coin, checking comps also keeps you from ripoffs. If the broker laughs hollowly while patting you on the back and says, "They're all going for $175,000," and you know that they all went for $150,000, you can laugh back and put the information on the broker's desk.
3. REMOVE NEGATIVE ITEMS FROM YOUR CREDIT REPORT
Many people have the incorrect impression of removing negative items from their credit reports. They think that these credit repair agencies can get anything off their reports that they want. This is not the case. Any legitimatedebt on your credit report can not be removed as long as it is 100-percent accurate. If you didn't pay off your Master Card and let it lapse until it went to collections, that will be a negative item on your credit report until such time as the bad debt entry expires. Usually, this is between seven and 10 years, depending on federal law, the type of debt, whether it's a late payment, charge-off, or bankruptcy, and the steps you take afterwards. You can check the accuracy of each item on your credit report once you have a copy of it. You're going to want to check the following items:
•Your account number
•The date you opened the account
•The status of the account, e.g. open or closed
•The payment status, e.g. current, in collections, etc.
•The high balance
•The credit limit
•Anything else that could be inaccurate
If anything doesn't match, the entry is considered to be illegitimate. What you do in that instance is write a letter to your creditor and ask to have the entry corrected or removed. Many times, the creditor cannot verify every aspect of the entry, and it will have to be removed. It is also possible to find out if any of the negative entries on your credit report are fraudulent.
4. START ELIMINATING DEBTS THAT MIGHT HINDER YOUR PURCHASING ABILITY
Before you think about how to buy foreclosures, you have to get rid of as much debt as possible. Even if you have a terrific payment history regarding your various accounts, if you have a large amount of unpaid debt, it can adversely affect your credit report. Depending on how much you owe, it could take a while to pay it off. You should plan accordingly because it is always a good idea to be debt-free before taking on a big responsibility like a mortgage. There are two methods of paying off debt: the avalanche and the snowball. With the avalanche, the idea is to pay off the debt you have with the highest interest rate first, which is usually a credit card balance. You follow that with all of the other debts you have. This method gets you out of debt faster than other methods and keeps you from paying extra interest. You probably won't see a lot of progress, however, so you have to stick to it to get ahead. The snowball method involves paying off the debt with the lowest balance first. It's easy to see your progress this way because the small debts go away first. The downside to this method is that you might wind up paying more in interest than with the avalanche method. Another trick people use is to transfer balances from one credit card to another. Many cards have introductory rates as low as 0 percent interest for a period of time. Let's say that a card has that rate for a year. If you transfer a $10,000 balance to a 0-percent introductory card when your other card has 19 percent, that's a $1,900 savings! That $1,900 can be used to pay down the balance of the 0-percent card or another debt you have.
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5. APPLY FOR DOWNPAYMENT ASSISTANCE
If you can put cash on the barrel for your new home, great. If not, then you will need financing. Obviously, you cannot get the actual money to make the offer before knowing what the price of the house want to buy is. You can, however, secure a preapproval letter that says how much the bank approves you to spend. It is also important to remember that you will likely have to get the financing from a bank other than the one that now owns the property. The officers of that bank who are in charge of the sale aren't interested in issuing loans. They're trying to unload a bad debt for as much as possible. Go elsewhere. Not only will it involve fewer headaches, but it will also remove any possibility of conflict of interest.
6. HAVE HOME INSPECTED
Lastly, before you sign on the dotted line to purchase your property, its wise to have the home inspected. Not only will this potentially save you from costly repairs once you move in, these repair costs can be factored into your purchase offer substantially reducing the sales price of the home. We’ve partnered with the most comprehensive source of prescreened and qualified Home Inspection services to ensure you get the best deal when hiring a home inspection contractor.