FHA foreclosures are the result of default on properties purchased through FHA home loans. The US Federal Housing Authority is a government entity that works to insure loans primarily for single families so that the mortgage companies can offer up more home loans without jeopardizing their capital too much.
The housing situation in recent years has given rise to bad debts in this area, thus the high number of FHA foreclosures. The main reason for the increase can be attributed to the fact that the FHA aimed to stabilize the residential real estate industry by making credit readily available for a larger number of individuals in the middle to low income sector. When the economy went into recession, the individuals who availed of the FHA-backed mortgages were among the first ones to default on their loans since they were not financially stable to begin with.
Cheapest Properties Around
When the housing market took a nose dive around 2006, the value of homes in general declined and the value homes purchased through FHA-backed loans reached a level where they are lower than the original loan. In effect, it was more practical for the owners of these homes to just stop paying their loan and allow their homes to go into foreclosure. Given this situation, these types of foreclosures are being offered up at a much lower price than their real market value.
This is a unique opportunity for first-time home buyers to acquire a home at a very low price and easy payment terms. This time around the screening for home loans has become rather stringent though and lender will often require their borrowers to show proof of their ability to service a long-term housing loan. If you are considering purchasing FHA foreclosures through financing you need to collate all your papers pertaining to your personal finance. This would comprise of a statement of income, your social security identification, tax forms, bank deposits and bank savings if any. Loans are granted based on a borrower's capacity to pay so it is important to be able to show evidence of a solid source of income.