Real estate buying bank owned is an investment strategy used to purchase foreclosure real estate. Real estate investors, individual buyers, and business owners are seeking out discounted properties owned by mortgage lenders because listing prices are often well below market value.
Using the real estate buying bank owned strategy can result in savings of 30-percent or more. However, bank foreclosures often require repair work, so buyers must calculate the true cost of the property prior to submitting purchase offers.
Buyers are often forced to take out high-interest remodeling or construction loans when investing in distressed properties that require substantial repairs. Lender-related fees for rehabilitation loans can add up to several thousand dollars. Once renovation is completed, property owners typically must refinance into a permanent mortgage loan which incurs additional closing costs.
Due to the abundance of foreclosure properties, many home buying programs are sprouting up. Caution should be used when visiting websites offering foreclosure lists for a fee. There are numerous trustworthy sources that provide lists of foreclosure homes for sale at no cost.
One of the best sources is real estate agents. Many realtors specialize in selling bank foreclosures and can help buyers easily locate the type of property they desire. Realty websites, such as Zillow and RealtyTrac allow visitors to enter specific search criteria to locate bank owned foreclosures.
Another popular source for buying bank owned real estate is Fannie Mae’s Home Path Mortgage program. Fannie Mae offers incentives and special financing options to individual buyers and real estate investors. Properties consist of foreclosure homes which have been repossessed through lenders with loans guaranteed by Fannie Mae.
Fannie Mae offers two home mortgage finance options which include HomePath Mortgage Financing and HomePath Renovation Mortgage Financing. The first is offered for homes which do not require repairs, while the second is used when properties require light renovation. When buyers obtain rehabilitation funds using Home Path financing they do not need to refinance when work is completed.
Individuals interested in buying Fannie Mae HomePath properties should consider researching HUDs Neighborhood Stabilization Program which offers government grants to rehab foreclosure real estate. NSP grants are available to qualified individuals and real estate investors who purchase properties in areas with high rates of foreclosure.
Also referred to as Section 203(k), NSP grants fall under the Community Reinvestment Act (CRA) of 1977. CRA allocates funds to each U.S. state. Recipients of NSP grants are allowed to obtain mortgage loans which include additional funds for required repairs. This can eliminate the need for obtaining remodeling loans, which eliminates the need to refinance mortgages and can save buyers a substantial sum of money.
Qualified individual buyers can obtain one NSP grant, while investors can qualify for up to five public grants. Combining government grants with Fannie Mae’s special financing option and low down payment requirement can help buyers maximize their housing dollars.
Obtaining NSP grants can be a lengthy process, but savings can outweigh the time required to undergo the application process. Details of the Neighborhood Stabilization Program are provided at HUD.gov.