Real estate buying bank owned is a strategy many investors and home buyers are using to purchase discounted foreclosure properties. It is also used by business owners seeking bank owned commercial real estate when expanding or starting their company.
Real estate buying bank owned can save buyers upwards of 30-percent off the property’s current market value. Although foreclosure real estate frequently requires repairs, these costs are factored into the asking price. Buyers often must apply for high-interest construction loans to cover costs of necessary repairs and refinance mortgages when construction is complete.
Currently, government-sponsored programs exist which can help buyers save additional money when buying bank owned properties. One of the more popular is the Neighborhood Stabilization Program offered through the Department of Housing and Urban Development.
Also referred to as Section 203(k), HUD provides grant money to qualified applicants who buy real estate in areas that have higher than average foreclosure rates. This program falls under the Community Reinvestment Act (CRA) enacted by Congress in 1977.
CRA provides allocated funds to each of the 50 states. Recipients must use NSP grants to purchase and rehabilitate foreclosure properties. Qualifying buyers who obtain NSP grants are allowed to apply for mortgage loans which include funds for necessary repairs. This eliminates the need for construction loans, as well as the need for mortgage refinancing. This alone can save buyers thousands of dollars.
Obtaining approval for NSP grants takes longer than applying for a conventional mortgage loan. However, the savings far outweigh the time required to undergo the application process. Individuals interested in applying for NSP grant funds can obtain information from HUDs website at HUD.gov.
Fannie Mae established the Home Path Mortgage program to liquidate their ever-growing inventory of foreclosure real estate. Home Path can be a good choice for buyers and real estate investors. Individuals who plan on purchasing Fannie Mae foreclosures as their primary residence receive ‘first-look’ benefits, while investors must wait until properties have been listed for a minimum of 15 days.
Perhaps the most attractive benefit of buying Fannie Mae properties through the Home Path Mortgage program is buyers are only required to provide a 3-percent down payment. Additionally, buyers are allowed to obtain down payment funds from outside resources. Down payment assistance is prohibited in most types of mortgage financing except for FHA and VA loans.
Buyers of Fannie Mae foreclosures must obtain prequalified financing prior to entering into price negotiations. All properties offered through Home Path are sold in ‘as-is’ condition. Any work performed to the home by Fannie Mae is not covered or warranty or guarantee. Therefore, buyers must conduct due diligence to ensure the property is sound. Buyers can obtain home inspections and real estate appraisals prior to closing.
Although the current real estate market is uncertain, utilizing government grants and special financing options can help buyers maximize their housing dollars. Those who invest in distressed properties now should plan on holding the real estate for five or more years to maximize the return on their investment.
Community Reinvestment Act
Neighborhood Stabilization Program Grants
Home Path Mortgage Program