subject: Home Prices and Foreclosures—A Vicious Cycle Or An Opportunity? [print this page] Home Prices and ForeclosuresA Vicious Cycle Or An Opportunity?
When to Buy A Foreclosure
If you do not know whether or not the market has hit bottom, it may seem like risky business to buy a home in foreclosure but it is possible to find some very appealing bargains out there. You might want to take into consideration a few important factors such as: the stability of the neighborhood; the condition of the property; and make sure of your financing.
Neighborhood Stability
If the majority of the homeowners in the neighborhood are long-term residents with affordable mortgages, the risk of further drastic price reductions is reduced. On the other hand, some newer neighborhoods may have a large percentage of homeowners who are now upside down on their mortgages. This is not a good sign.
The Condition Of The Property
It is not unusual to find foreclosed homes in very poor condition. There can be a couple of reasons for this. If the family was in reduced circumstances for some time, necessary maintenance was probably neglected. Termites may have raged unchecked, wood rot left unchecked and certainly painting and yard maintenance might show signs of neglect. Then again, sometimes people deliberately mistreat the property to show their frustration and anger at losing the home. Before purchasing a foreclosure, it is wise to hire a trusted contractor to give you an estimate of what it will cost to bring the property up to your standards. If the property is still a good deal, the next hurdle is getting a loan.
Make Sure Of Financing
Just about everybody has heard that while interest rates are very affordable, it is not easy to get a home loan these days. And the rumor is true. It is more difficult to get a home loan than it was during the peak of the housing bubble but it is not impossible. If you are planning to buy a foreclosure or any home these days, it is a good idea to be prepared. You can do this by making sure your credit is excellent. A Credit Score around 750 to 850 is desirable. Check your score and if it needs repairing, repair it. Next, it is a good idea to show the lender that you have both a savings and a checking account. Bankers like to see that you are financially stable. If you are thinking of changing jobs, wait until after your home loan is obtained. Bankers like to see a stable job history. And finally, get prequalified. During the process of prequalification, the lender checks your credit and your history.
