Slavsky Mortgage

When buying a foreclosure

There are a lot of homes to choose from these days. You probably, know exactly what kind of house you are looking for. Should it be spacious, with a backyard, with the pool and fireplace? Far away from the city noise or do you prefer it to be close to downtown? Shopping for a house is a fun part.

Now, back to more serious things. When buying a home:

- Get preapproved for a mortgage. Just like shopping for insurance, you need to pick up the phone and do some calling. Check several lenders (commercial banks, mortgage companies and credit unions) in order to compare. They will estimate your monthly payments, interest rate, what you’ll pay over the life of the mortgage for the same amount, term and type of loan. Do not forget to ask about the broker, underwriting, and any other additional fees, closing, transaction and settlement costs. Do not be shy and ask if they can reduce or waive these fees (a lot of them are negotiable), and whether they are willing to lower interest rate;

- Have your credit report in a good condition. Now more than ever lenders want to take a closer look at you as a customer. Everyone knows that credit score plays a very important part in our life. Your loan rate will be determined based on how high or low your score is;

- Check with your homeowner’s insurance company for the potential cost to insure the new home. Try to find out what the current homeowner pays for taxes, heating, cooling and other utilities.

A lot of houses belong to the banks. The prices are usually much lower on that kind of property, which makes it so tempting. But there are a lot of risks to consider. Here are some things you need to know when buying a foreclosure:

- You may want to wait a bit before buying the property. Lenders are usually trying to sell it for a full price in the first 30 days. Price will be dropping after that;

- Have a professional detailed home inspection. This is always a good idea, but in case of foreclosures – especially;

- Be ware of the redemption period (in some states), which allows the original owner to pay off the debt and take the foreclosed home back;

- Be patient – banks may take about 60 days to decide on whether to accept your offer on a foreclosed property;

- Consider title insurance to protect yourself against uncovered or undisclosed liens. It will be helpful in case someone (an ex-spouse of the previous owner, for example) tries to claim the home after it’s sold.

Do not rush. Prices are still dropping. Even, when they reach the bottom, do not expect sudden growth – they will stay at the same level for a while. And catch the wave when the prices will just start to climb up. Meanwhile bring your credit score as high as you can and try to save more money (for beautiful furniture you’ll need once owning a home).