Want to Buy a Foreclosure? Read These Important Tips First!

Want to Buy a Foreclosure-Read These Important Tips First- 150x150Low interest rates and a large inventory of foreclosed homes seem very attractive for those looking to buy a home for a low price. Whether you are an investor who is looking to make a profit or a simple home buyer looking for a home for his or her family, foreclosed homes are a great alternative to buying regular homes. However, low prices can quickly make you forget some essential home buying aspects, and you can quickly end up with an expensive problem on your hands. You can get some really great deals on foreclosed homes, but you should pay even more attention than when buying a regular home.

Buying a foreclosed home requires a certain degree of experience, in order to protect yourself from buying a home that will require extensive repairs or has some major issues. Here are a few tips that you need to keep in mind when buying a foreclosure.

1. Don’t expect to find out a lot about the home. Foreclosed homes are owned by banks and there won’t be any disclosures when buying such a home. You won’t know who lived in the home before or what kind of people they were. Unless you do some research on your own, you won’t be able to tell what kind of neighborhood the home is located in. You are pretty much buying a home blindly, without finding out too much about the property’s past or present condition.

2. Hire someone who is specialized in foreclosures. Buying a foreclosed home is different than making a normal home purchase. Hiring an agent that specializes in foreclosures can make this process significantly easier and save you from some trouble. When making a purchase like this, you need to move quickly and have all the paperwork ready when it’s needed.  A real estate agent specialized in foreclosures can be of great help with having everything ready on time. A professional can also use his or her contacts in order to help you find more foreclosed homes than you would on your own.

3. Have financing available before you start looking at foreclosed homes. Just like you would when purchasing any other home, you should be at least prequalified for a loan before shopping around. By doing this, you will know how much you can afford to pay for a foreclosed home, which will make searching for the right one much easier. More importantly, you will be able to make the purchase much quicker, and lower the risk of losing the home to another buyer.

4. Prepare for repairs and improvements. Many home owners whose homes were foreclosed might have left the home in a poor state, or even stolen some of the appliances or fixtures. You, the buyer, will be responsible with home repair and replacing all of the missing or broken appliances and fixtures. An alternative would be to apply for a 203(K) mortgage, which is designed for those who are buying a home that is missing certain elements, like toilets, or needs other repair work.

5. Determine if a foreclosed home is right for you. Especially if you are a first time home buyer, buying a foreclosed home might not be your best option. Most people, especially first time home buyers, generally want a home that they can move into without having to do many modifications or repairs in the beginning. Most foreclosed homes will almost always need some sort of repairs or improvements, so you should ask yourself if that is something that you are willing to do before buying a foreclosed home.

Foreclosures can be good deals as long as you know what you are doing, and have proper knowledge of the process of buying a foreclosed home. You have to know how to prepare for such a purchase and what problems you may encounter in order for this to be a great alternative to making a regular home purchase.

Divorcing and Have an Underwater Mortgage? Options Here!

Divorcing and Have an Underwater Mortgage-Here's What to Do- 150x150Divorce is an unfortunate situation to be in, and you probably want to get it over with as soon as possible. Unfortunately, if there’s also a home with an underwater mortgage involved, things can get even messier. Statistics say that around 50 percent of all marriages in the United States end in divorce, and more than 20 percent of all homes are underwater, so divorcing when you have an underwater mortgage is a pretty widespread problem.

Normally, when a couple divorces, the home is either sold and the money split evenly, or one of the spouses keeps the house and the equity in it will count toward their share of the assets. This is what happens when there is equity in the home, meaning that the home is worth more than when it was purchased. In case of an underwater mortgage, the home is worth less than when it was purchased, and the home has negative equity. This means that the home is not an asset anymore, but a liability, and it is much harder to decide who gets the home or how the debt will be split. Here are some solutions to divorcing when you have an underwater mortgage.

Refinancing

Refinancing is expensive and there’s a chance that you will be denied in your situation, but, thanks to government programs, such as the Home Affordable Refinance Program (HARP), you still have a chance to refinance your home, even if your mortgage is underwater. The best way to take advantage of this program is to refinance the mortgage under the name of only one of the spouses, then making changes to other aspects of the divorce in order to reflect the financial liability that the spouse who is refinancing is taking.

Lenders are reticent when it comes to refinancing if one of the borrowers is taken off the mortgage, even if it’s through the Home Affordable Refinance Program. You will have to make sure that the spouse who refinances has enough income to continue paying the mortgage by himself or herself.

Foreclosure

This is the easiest way of dealing with an underwater mortgage when divorcing, but it’s also the solution that will leave the biggest black spot on your credit report. Typically, a foreclosure will stay on your credit report for up to 7 years, making it hard for you to get another mortgage loan. The foreclosure process also takes a long time, which means that it will take that much longer to repair your credit score.

If you remarry after your divorce, and your new spouse has a good credit score, you could get a new home using their credit, but you will most likely be unable to contribute to paying the mortgage with your income.

Short Sale

In order to sell your home for less than what you owe on your mortgage, you will have to convince the lender to allow a short sale. Lenders usually agree to a short sale when it is clear that the borrower is unable to keep making mortgage payments, which may be the case if the income from both spouses was used to make mortgage payments.

The lender might not agree to a short sale, and hold both spouses liable even if they are divorced. Also, a short sale will have a significant negative impact on both of your credit scores, and it will most likely take several years until you will be able to recover from this hit and have a good credit score again.

Deed in Lieu of Foreclosure

Another option would be to simply return the home to the lender, if they agree. You lose the home, but won’t be held liable, like you would with a short sale. This is a win-win situation, because your credit score won’t take such a big hit from a deed in lieu of foreclosure, and your lender avoids the high cost of foreclosing your home.

Another option would be to continue living in the same home with your spouse while still divorcing. This is often a bad idea for both parties involved, but if you can pull it off until you can refinance or sell your home without losing money, then you should take it into consideration. Divorce is a bad experience, and adding an underwater mortgage to that will make it even more of a mess, but there are ways of dealing with this situation that will help keep more money in your pocket.