Are you looking for foreclosed homes? Deal or No Deal
Unless you are hiding out somewhere, you have to have heard about the immense number of foreclosures sweeping the nation. Rhode Island is one of the top states for foreclosures. The reasons are varied, loss of income (Rhode Island has a very high unemployment population), economy, bad mortgages, home values dropping. The list goes on. However, because of all this, there are a "few" good deals out there.
Buying a foreclosed home (also called Bank owned or REO, Real Estate Owned) can be viewed in many different ways. A first time homebuyer is not usually the best candidate for a bank owned home, due to the amount of work that needs to go into it to make it liveable. Also Investors with Cash, and AS IS, no inspection offers, are always viewed as a better offer. The selling bank does not really want to have to wait the time it will take to get a loan, when they could have a closing in two weeks. However, sometimes if you make a good enough offer and can show you are a solid buyer, then they will accept. How do you show you are a solid buyer?
First, you definitely need a prequalification letter to even put an offer in on a bank owned home. Investors need Proof of Funds (a statement from a bank showing the actual funds) As a first time buyer in 2009, a new program has come out called the Neighborhood Stabilization Program...This program is only available in certain neighborhoods and is on a street by street basis. You would need to contact your mortgage broker or bank for assistance. You can also go online and check it out. With this program you may qualify for up to 20% down payment assistance. Also you will be able to qualify for a rehab loan....Picture this. You find a house for say, $60,000 that needs loads of work. It is in the NSP area. You think it will need approx $40,000 worth of work to make it liveable. Now, you need to prove your figures with Contractors, plumbers, electricians etc, but once you have these figures you are now able to borrow $100,000 with a 20% down payment assistance. This brings your actual mortgage to $80,000!!! Plus if you buy before December 31,2009 you get the $8,000 tax credit!
Now you have a home that will be worth approx $120,000 (even in this market) it will be totally rehabbed like new and now you have instant equity...the difference between the $80,000 that you owe and the market value of approx $120000!!!! What is better than this?
Yes, it takes some work to find the house, get your contractors bids and follow through, but it would be well worth the effort.
Just remember that investors with cash are out there and they are literally jumping on these deals. Even at that, you can tell one you are interested and get a loan for $120,000 with a 20% down payment if it's in the right (NSP) area. Not quite as good a deal, but still not a bad one!!!