Dangers of Foreclosures Pt 4

The bank will do little to assist you. I know this may seem like a moot point but you would be surprised the number of buyers who overlook or under value this portion of the deal. Your offer and the likely discounted list price (discounted from similar comps nearby) should already account for the risk you're taking on an "as is" property. They won't provide a disclosure about a leaky faucet, or the broken closet door upstairs.

When buying a home, the contract makes certain provisions which will allow you to have an inspection, so get the biggest and best inspection available. Also inquire about an old inspection report, review that prior to making your offer.

If you are familiar with the buying process, don't expect any of the standard processes and procedures to be followed by the bank. The bank will have its own contract that protects its interests. This contract will be followed by dozens of pages protecting the bank from future lawsuits, referring to the sale as "as-is" and putting nearly all the burden on you, the buyer. In some states, if the bank requires the buyer to use a particular title company, then the bank would be required to pay the buyer's premium on the title insurance. This could translate into huge savings for the buyer. Whatever you do keep your eyes open and remember there is no such thing as a stupid question.

Dangers of Foreclosures Pt 3

Yesterday we touched on this subject very briefly. That is when you position yourself to purchase a foreclosure it may not be all as it seems on face value. A lot of your more expensive homes may be effected by this more than the lesser priced homes. This is due to the high-end appliances, fixtures and amenities used to build these homes. More often than not previous homeowners are blamed for the vandalism to these homes, however opportunistic vagrants are usually to blame for the damage.

Conversely, when homeowners are to blame it is usually due to resentment and unsuccessful attempts to keep the property. The previous homeowners usually have some form of emotional attachment to the property. They usually have looked at several homes before deciding on this one, took in to account their own careers, children's future and neighborhood suitability. Then we bring into the fact that they have to give this all up in a moments notice. They have invested time, money and dreams into this property and now they have to move.

This can cause some serious separation anxiety and disgust towards the lender. Consequently since they can do no harm physically against the mortgage company then they decide to take it out on the property. Ultimately, this will hurt the home's value and somebody will have to pay to replace and repair the damage that has been inflicted. Nevertheless, your goal is to ensure that you are not stuck with the bill, if you are make sure to include this in your negotiations and mention it to your broker.

Dangers of Foreclosures Pt. 2

Three letters you should become familiar with if you are in the market to purchase foreclosures, R-E-O. REO stands for "real estate owned." REO properties are owned by the bank after going through the foreclosure process.

Typically in a REO sale, there aren't any disclosures. Basicslly the seller is not there to disclose the in's and out's about the property. This includes but is not limited to pre existing issues about the property that may need repairing and/or replacing all the way to particular neighborhood association restrictions.

Make sure with your agent to learn as much as you can about the home and the neighborhood. If the property sold in the past five years, your agent may be able to obtain past disclosures or obtain city records. Also make sure to always double-check your title work.

Dangers of Foreclosures

Times have changed, a lot of people are still facing financial shortfalls. There was a time when people were so concerned about their image they would do anything to keep that image up. Allowing your home to foreclose & walking away from a mortgage was something that was almost unheard. When people do have their property foreclose they sometimes decide to take out their anger & frustration against the mortgage company by inflicting physical damage on the property itself.

Many realtors are pushing their clients toward foreclosed properties. However there are some challenges to purchasing them and some red flags to look for before deciding to purchase one.

1. Don't expect to make friends.

When you are purchasing a foreclosure then you are dealing directly with the bank. It's strictly business for the bank, they don't care about how good a neighborhood it is to raise your kids or about the school PTA. Nevertheless that could be a good thing because the bank is not in the real estate business. They want to move the property as quick as possible but they want to maximize their profits in the process.

Because you're dealing with a bank, not an individual homeowner, be prepared to wait for a few days, if not weeks, for a response. For the most part, the bank's agent doesn't even show the contract, the pre-approval letter, or any of the offer pieces to the bank. Instead, the bank's agent inputs the data into a website or piece of software. Remember for the bank, they are like Jerry Maguire "Show Them The Money."

Additional Factors that may effect your Mortgage Payment

Monthly mortgage insurance affects your house payment. With a less than 20% down payment, the lender will more than likely require the borrower to pay monthly mortgage insurance to ensure against the possibility of defaulting on the mortgage.

By paying something down or walking into the house with some equity will give you more leverage when borrowing funds.
Make sure to check and see what is the minimum credit score required for financing. If you don’t meet the minimum, look into other options you may before you apply for a home loan.

Assets/reserves — In most cases, you’ll need at least two months of PITI saved in the bank to meet the reserve requirement. However make sure to check with your lender for complete details.

How Monthly Liabilities Apply

Using the example from two days ago, let’s say you’re trying to decide how much house payment you can afford coupled with other monthly obligations: A vehicle payment for $300 per month & $80 per month in credit card payments. Assuming our example income of $5,638 per month, in order to purchase that same house for $350,000, the monthly income would have to be $6482 per month adjusting for total monthly liabilities (determined house payment + other debts) ÷ monthly income. The other choice is to reduce the purchase price to $300,000, with effectively $380 per month in other debts, which influences borrowing power by $50,000.

*Mortgage Tip: take 45% of your monthly income less monthly liabilities. This is the maximum house payment you can qualify for, then simply equate what the monthly payment is relative to how much you can borrow based upon using $725 per month for every $100,000.