Foreclosures for Low Down Payment?
Foreclosures and Bargain Investment Properties
What about foreclosures for no money down or low down payment? For investing generally?
With foreclosures (also known as REO properties or sometimes repos ) your down payment will be driven by your loan, not by the fact that a bank owns the property.
Most lenders have a policy of getting the property “off the books” once they’ve foreclosed. What this means is that they don’t want that property or any new loan associated with that property left on their books. Generally, you need to either find another source of financing or pay cash.
In some circumstances, the owner will finance the property through their normal mortgage process, with normal qualifying and normal down payments for that lender.
Freddie Mac (a large government sponsored lending pool) offers the “Homesteps” program that includes low downpayment loans on their foreclosed properties - 5% down for owner-occupants and 15% down for investors. Homesteps homes are also available for purchase by investors and sometimes offer some excellent deals, especially near the end of the year or quarter.
What about general investing in foreclosures, otherwise known as REO properties? There are definitely some bargains to be found by the diligent investor. Many of these fall into the “fixer-upper” category and foreclosures are almost always sold strictly “as-is” without warranty by the seller — in many cases, the seller is an out of state lender and no one from the company has even been to the property.
The bottom line is that while you may be able to use low down loans to buy a foreclosure, foreclosures aren’t any better than any other property for low down buyers and may be worse for the low down buyer without the finances to make substantial repairs.
