Yes buying foreclosed houses could save you a lot of money but there are some things you need to be aware of.
Actually foreclosed houses often have a negative stigma attached to them, but in reality they can be a great investment for both first time homeowners and homeowners looking to save money on their next home purchase. Here are the main 8 steps required.
- The first step is to get a reliable and trusted real estate agent. You should never try to purchase a foreclosed house by yourself (unless you are a real estate agent) because there are too many pitfalls involved in buying a foreclosed home.
- After you have secured a real estate agent, you can then get pre-approval for a loan. You must obtain pre-approval unless you’re planning on purchasing the home with cash. Pre-approval means you have met with a loan officer and he has “pre-approved” you for as much money as he thinks you can obtain, based on your credit score (be sure to read on and check out the resource below if you want to find out what yours is) and other factors.
- Next you must look for homes. Your realtor should be helpful in this step and should be able to guide you through the process. Checking out each home that interests you is a must and the realtor can help you with things that you may overlook or not see.
You can of course do the work yourself by checking out some foreclosure listings online (this is one of the better ones I have comes across – its updated daily and you can trial it out for 7 days for next to nothing. Yep, there are free listings out there too but most of these are out of date so just be careful if you go that route.)
- After you have looked at homes, you’ll have to make a decision on which home to purchase. This can be the hardest part of the process but it must be done. Keep in mind that when purchasing a foreclosed home, there is often repair work that needs to be done.
- After choosing which home to purchase, you will need to obtain financing. Unless you’re planning on purchasing the home outright, you will need to obtain a mortgage through a bank. Keep in mind the repair costs of the home when you’re calculating the monthly payment of the mortgage.
- Next, you should have the home inspected before making the purchase. Since the home is foreclosed, there may be unforeseen problems with the home that neither the realtor nor the home buyer has noticed. Getting the home inspected by a professional is the best way to spot these problems.
- After selecting a home, obtaining financing, and having it inspected, it is time for closing. Your real estate agent should guide you through this process – make sure you save all paperwork for future references.
- Finally, after all of the previous steps have been dealt with, it’s time to move in. It is now time to purchase insurance for your home, have the deed signed into your name, transfer the utilities into your name, and get the tax information correct.
By the way – if you want to check out your credit score before you look further into buying foreclosed homes then here is the article on 5 steps to improve your credit score in 60 days. With better credit score, you can get a better rate on your loan and could save yourself thousands of dollars over the life of a mortgage for that foreclosed property you are seeking out.
More reference: Home Foreclosures – 9 Most Commonly Asked Questions