There are a lot of good deals to be had right now in the Northwest Indiana real estate market. From affordable homes in Dyer and Portage to investment jackpots in Hammond, and surrounding neighborhoods. However, if you don't have a lot of cash to spare, there may be a way to use an FHA loan to buy a foreclosure.
The primary function of the FHA or the Federal Housing Administration is to ensure loans against default if there made by approved lenders and meet the guidelines. These loans are intended to make it easier for homeowners to buy homes that they may not otherwise qualify for.
That guarantee can also offer a steady inventory of foreclosures when buyers can't meet certain obligations and have to give up their properties. FHA loans can be used by multiple types of residential homes and properties depending on the state of repair regardless of which lender currently owns them. However, there is one major catch, the homes need to be lived in by the borrower. You cannot use an FHA loan to buy an investment property that you're immediately going to rent out. You must live in the home for two years before turning it into an investment rental.
So what should you know about using an FHA loan to buy a foreclosure?
Not only must it be your primary residence but it must be inspected to ensure that it meets the minimum standards of livability. This means that it must be appraised and approved by an FHA appraiser.
You can, however, get at 203K rehabilitation loan with a 3.5% down payment where the lender finances both the purchase of the home and any repairs that need to be made.
Your credit score needs to be 580 or higher and 20% of the appraised value of your credit score between 500 and 579. This can be a tricky position when you're competing with investors that may have all cash. [Source]
It helps to have your financing, credit history, and any cash you do have ready to go and on hand in order to compete. Not all cash buyers win out on a foreclosure. Terms can be just as important as a cash offer. It also helps to have a real estate agent that understands the process and can help you navigate the sometimes confusing waters of buying a foreclosure and an FHA loan. For more information contact our office. We have experts that specialize specifically in FHA loans and foreclosures and short sales. With your investing for the future or looking for a great deal right now, trust Nicole Hansen Group for your next Northwest Indiana home purchase.