Buying A Home Post Foreclosure
If you recently lost your home to foreclosure, how long do you think it’ll take before you can become a homeowner again? 5 years? 7 years? Maybe even 10 years?
Many consumers believe that once they have lost a home to foreclosure, they won’t have the opportunity to purchase another home for many years. Thinking that their credit is trashed and that a foreclosure will be on their credit report for 7 or 10 years, perhaps longer, some people are under the impression that homeownership is off limits.
True, a foreclosure will be on your credit record for beyond the seven year period that most bankruptcies are listed. Yet, having a history of a foreclosure doesn’t have to stop you from buying another home. Moreover, you could find yourself in another home a few months post foreclosure.
Most conventional lenders will not consider lending you money for a home quickly, for the simple reason that if you lost a home recently, then you could lose your home again. But there are factors which might be taken into consideration by the lender:
- You lost the home due to divorce, an illness, loss of job, or some other valid reason.
- You have the cash on hand to put at least 20% down on the home you want to purchase.
- You are willing to pay a higher interest rate, perhaps as much as 2% over the current rate offered to their best borrowers. Along with the bigger down payment and possibly including some points, a lender may decide that you are a risk worth taking.
Loans and loan rates are always determined based on risk factors. If a lender believes that you are worth the risk and you can put down a large amount of cash, then you could be considered for a loan.
Granted, you’ll pay tens of thousands of dollars more interest payments with a higher risk loan, but you can always refinance later especially as your credit improves and a lower rate is offered to you.
Home ownership post foreclosure isn’t a given, but it isn’t impossible either. You must demonstrate to a lender that you are worth the risk and hope that they can see past the problems which caused you to lose your home in the first place.
04b-/08 home buying
Home Buying Tip
for the weeks of: May 13
Location ... Location ... Location
You should know how important those 3 words mean. It could mean satisfaction in you home purchase and potential re-sale down the road. So understand what "location" means.
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Buying Your Pre-Construction Condo
In some areas of the country, the condominium market has crashed as a huge surplus of defaulted or unsold homes has wreaked havoc on the market. One market that comes to mind is Miami.
On the other hand, some cities are experiencing a building boom as empty nesters, retirees, and investors look for good values in real estate. In my area — Raleigh, NC — several all-new construction projects are in progress, providing state-of-the-art housing adjacent to everything: government offices, museums, businesses, shopping, and more.
If you are desiring all-new construction or conversion housing, the time to start, build, and complete the project can span several years. This means that you must do your homework before deciding whether a particular condominium is right for you. Let’s take a look at some things you should consider when buying pre-construction.
Why would someone buy something before it is built. For several reasons:
- Oftentimes, early buyers receive a discount as builders want confidence that their project is in demand. By offering a price slightly lower than the market rate, you could find a nice deal.
- Buying now and paying for it later could mean that your property has appreciated during the time it took to be completed. For example, if that two bedroom garden high-rise was contracted for $440,000, it could have gone up in price since. You’ll pay financing on its original value or if you are looking for a way to make some money, you could sell your unit and pocket the money.
When buying pre-construction keep in mind the following:
- What will your financial situation be when the project is complete and you’re ready to move in? Will you need a mortgage and, if so, will you qualify for one?
- Will interest rates be stable or are they trending higher or lower?
- If you are investing in the property will you live in it or rent it out? What are the rental rates for comparable units?
- When the project is completed, what will the neighborhood be like? Will there be other projects under development and what sort of local amenities will be found nearby?
Of course, when you buy pre-construction, your chances of getting what you want are greater if you act sooner rather than wait. Specifically, you’ll be able to choose the floor, floor plan, and unit location (will it face an office building or will you have an unobstructed view of the river?) if you act quickly.
Consider also your down payment monies, possible taxes (property taxes will come later), fees, and the like when buying pre-construction. Theoretically, your cash outlay should be small at first.
The end result of new or repurposed housing is that your home is brand new. You bought it at yesterday’s prices and, if you did all your research, you now possess a home that has appreciated significantly in value.
04b-/08 home buying
Lease Options Leading To Home Ownership
Most certainly, the national real estate landscape has quieted, with home prices and sales down over the past year. Even with the reduced mortgage rates, many people will find it difficult to secure a home loan.
Consumers who are locked out of the housing market can still get in with a little creativity on their parts. By leasing a home with an option to purchase the property within a specified period of time, home ownership could be within reach.
A lease option is a terrific way for people to get into the home they want right now and live in it as a tenant. Then, at some point within the option period, usually one to three years, renters can “opt” to purchase the home for a predetermined price.
What you should know about a lease option:
- Lease options are typically for a one to three year period. If you want the home during that time, you can opt to buy it or walk away and allow the landlord to sell it to someone else.
- You’ll be expected to pay an option deposit which will be applied to your purchase. In addition, you may be charged an amount over and above your monthly rent money which coupled with the deposit be applied to your home’s purchase.
- If you decide that you don’t like the home, you can walk away from it without obligation to purchase it. Depending on the terms of the agreement, you may or may not get the deposit and extra monthly payment monies back.
- A lease option allows you to accumulate money which will act as the down payment for your home. Many consumers find that coming up with thousands of dollars for a down payment is impossible. The accrued funds will act as your down payment.
Of course, you must have good credit in order to qualify for a mortgage once you exercise your lease option. Make sure that your credit reports are clean and your credit score is good enough to qualify for a loan. See a mortgage professional to get pre-qualified for a loan before exercising your option.
A lease option serves as a method of forced savings of sorts, money you’ll come up with on a monthly basis which will be added to your down payment. Not every seller will agree to this option, but in a slow market presenting a lease option could be one way that a seller gets out from underneath his property, but one to three years later.
04b-/08 home buying
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