Are you currently looking at buying a foreclosed home? If you’re an investor, you may be reviewing prospects and looking to purchase a low-cost home. Wading through the details can present interesting opportunities and unique challenges when you’re trying to figure out exactly how the financing process works.
Buying such a home is a cost-effective opportunity and can provide a way to save money and grow your investment portfolio — but can you buy these homes with conventional loans? The answer is yes.
While using a mortgage broker in Fort Worth can help you figure out your next move, we’ve compiled this foreclosure buying guide to demystify the process, including the three steps for how to buy a foreclosed home.
Step 1: Understanding the Three Stages of the Texas Foreclosure Process
Although you can buy these homes using traditional loans, before we get to that, it’s important to review how a foreclosure purchase with a loan works. In Texas, this process consists of three key steps:
1. Pre-foreclosure
When a homeowner has failed to make mortgage payments for a period of 120 days, they will receive a notice of default and intent to accelerate, which starts the process. The notice provides the homeowner with a final opportunity to have the loan reinstated within 20 days; however, during this 140-day period, as the buyer, you can make an offer on the house that suits the homeowner’s needs and is sufficient enough to pay off their debt.
2. Public Auction
A Texas lender will put a property up for auction if the homeowner chooses not to reinstate their loan or sell their property in the allotted period. Next, the lender is required by law to publicly announce the auction and open it up to potential buyers.
It’s important to note that these houses are placed on auction as is, and you are typically not permitted to inspect the house prior to purchase. To participate in the auction, you’ll need a cashier’s check for a down payment and proof of funds. Remember that your final price might be higher than you anticipate, so you must have enough funds to cover the sale.
3. REO
REO (real estate-owned) property consists of foreclosed homes that fail to get sold through public auction and become owned by the bank. Although banks are typically enthusiastic about selling these properties, there are regulations to consider, so the process can be time consuming.
Step 2: Purchasing a Foreclosed Home With a Conventional Loan
Now that you know you can use a conventional loan, here are a few more key points to consider.
When financing these properties, a buyer can utilize pre-foreclosure or bank-owned property financing. A conventional loan is standard if you want to use a loan for the purchase.
While this choice provides a buyer with low interest rates, the turnaround closing time is 30-35 days, and to qualify, the property must be in good condition. This type of loan is determined solely by your credit score and income.
As a final note, you’ll also want to consider the differences between FHA vs. conventional loans as you weigh your options.
Why Use a Mortgage Broker in Fort Worth?
Reach out to Champions Mortgage to learn more about your mortgage options. We offer turnaround times of as little as 15 days and low interest rates better than what most credit unions can provide. To learn more about our flexible home financing opportunities, contact us today at (281) 727-2500, get a quote, or apply now to get the best deal.
