Home Loans and Foreclosures

By | September 27, 2021

It’s looking Foreclosures as though this year is on track to top last year for the number of likely foreclosures that are going to occur in the United States. While this is not very good news for the people whose mortgage is now months past due, this can be a potential opportunity for first-time homebuyers and people who are looking for housing deals in their particular market.

Since 2009 unsold home inventory, including foreclosed upon properties has been rising. That means that banks now own more and more empty homes on their books. Banks don’t like owning unoccupied houses because that means they aren’t making any money from mortgage or renters and they aren’t making any money from selling the property.

Home Loans and Foreclosures

Basic economics dictates that as the supply of homes goes up and the demand for homes remains low or goes down (a high jobless rate means many people don’t have the income to buy a house) then the prices of homes will probably continue to drop in many areas.

Up to this point, many banks have been reluctant to sell their homes for drastic reductions because there is the overall feeling that housing values will eventually bounce back. But some banks are being pushed to the breaking point where they can no longer afford to simply hold on to a glut of empty houses for much longer.

Home Loans and Foreclosures
Home Loans and Foreclosures

Remember that whenever you buy a foreclosed home you’re really buying the house from the bank and they need to approve the amount of money you offer. A foreclosure is a previous home loan that’s gone bad, so banks have been much more cautious about loaning out the money in recent years. That makes it harder for Foreclosures to lend out money, but a lack of loans means that more people haven’t been able to buy houses from them. It’s a vicious cycle that we’re only starting to come out of.

There are disadvantages to buying foreclosed homes and it pays to do your homework before jumping into a sale. Since banks are in the business of loaning out money (and not owning homes) you can sometimes work out deals with banks.

Using The Foreclosing Bank As A Lender -Foreclosures

Some banks will be more willing to work with you, and may even reduce the price of a property if you’re willing to apply for a mortgage through them. In a case like that, the bank is really winning on two counts: they are removing an empty home from inventory and they are making interest on the money you’re paying in the mortgage.

Bargaining With the Foreclosing Bank: Again, banks are in the housing business to make money, not own a lot of property. You’ll need to be flexible and be willing to work with their various departments to navigate through the entire process. Some lenders are Foreclosures not even willing to give out loans for foreclosed properties and some will require that you and the home meet special requirements or go through a lengthy approval process.

Consider All Your Costs: Yes, you can often buy foreclosed homes for a much lower price than a regular home sale, but you may have additional costs to consider including buying appliances, housing repairs and Foreclosures additional home inspections. When you’re applying for a home loan to purchase a foreclosed house you’ll need to take all these costs into consideration and communicate them with your bank ahead of time.

Also Read: The Energy Efficient Mortgage

Home loan rates are expected to slowly rise over the next several years and the inventory of foreclosed homes will eventually shrink back down to pre-recession levels. If you’re looking for a good deal on a home or if you’re a first-time homebuyer (and you have plenty of patience with Foreclosures ) then you may be able to take advantage of the historically low mortgage rates and the high availability of houses to buy your dream home for much less than you ever thought imaginable!

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