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Buying Bank Foreclosures
by Sheryl Landrum
CMR Columnist
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Are there different home loans and processes when buying a house that is now owned by the bank due to a mortgage default? These properties are called REOs (real estate owned) by the lender and while there are a few differences, borrowers interested in purchasing a bank owned property follow the same guidelines for applying for any other home mortgage loan.
A home mortgage is still a home mortgage, even if it's called by another name. If you are considering a bank owned purchase, be advised that you need to qualify for your home loan like any other home purchase that needs a mortgage. There are no special home loans for buying foreclosed property. While there are some differences in how you deal with a bank owned purchase, the same home loan basics apply.
Purchase offer agreements on bank foreclosures are not done face-to-face, so make sure your offer contains a mortgage pre-approval letter from your lender. Make your purchase offer easy to accept and include a pre-approval letter from your mortgage broker or lender. Talk to your real estate agent about your offer first. Most real estate agents do not want to show a pre-approval letter for a $500k mortgage if they plan on offering a $450k purchase price with a mortgage of $300k. Make sure all contingencies are spelled out clearly on the purchase offer as well before submitting your mortgage loan application. If the purchase contract specifies all termite work has to be done prior to closing, the mortgagor will not fund the loan until it is done.
Like any other home purchase, banks love to see qualified buyers with good offers. For a successful purchase, make sure you are prepared before making an offer on an REO.
About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer specializing in mortgage issues.
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