Can I use an FHA loan to purchase a foreclosure? In today’s market this is a common question. With Foreclosures having been around now, in abundance, for a few years and the days of $0 down financing gone..the next best thing is an FHA loan with as little as 3.5% down and relatively easy underwriting standards. So it is not uncommon to hear the question “Can I use an FHA loan to purchase a foreclosure?”
The answer is YES! And the answer is IT DEPENDS! Wait..What?
Don’t you love clarity!! Ok here is the deal folks..You can buy a foreclosure with an FHA loan, however, if it is not all pre approved and you still have to qualify well that my friend is called a contingency in many cases and REO properties have terms whereby they will not accept offers with contingencies. Same thing would apply if you made your offer ‘contingent’ on selling your current home. Many REO sellers are not interested in this kind of offer. In fairness to them, why should they be..if there is a clear cash offer just around the corner then they are in a better position, from a business perspective. So the question is what is ‘right around the corner’ and can the banks wait that long?
The answer to this is an ever moving target. So if you are planning to use an FHA loan- and seeking out foreclosures at the same time, do yourself a favor follow these 3 tips:
- Get with your lender and get pre-approved…some pay stubs, a W2 or two, a few other documents and a Pre-approval is done…no muss no fuss
- Let your Real Estate Professional know you are open to Foreclosures AND that you have your pre-approval letter in hand..bring it to him/her…
- If you find the ‘right’ property to meet your needs and you want to make the offer- know what your top limit is and do not let emotion cloud your business decision..with the help of your real estate professional make a solid, sound offer and be prepared for rejection and acceptance. In other words- have a take it or leave it attitude and you will do just fine!!!