Buying Foreclosed Homes HUD in California

The Obama Administration launched stimulus programs designed to boost home ownership and reduce the number of repo properties in the country.

In support of the federal government's initiative, the U.S, Housing and Urban Development's (HUD) mortgage loan service unit Federal Housing Association (FHA) increased its loan limits in San Diego County, California to almost $700,000. The loan program requires a down payment of less than 5 percent, an average FICO score and a two-year employment.

However, many potential buyers of foreclosed homes HUD are complaining that their purchase offers are being ignored even if they are FHA-based loan contingencies.

Industry experts blamed the myriad safety and documentation requirements for FHA loans for the delays. They pointed out that an FHA-guaranteed loan requires timely cooperation of as many as 53 different parties. Any error by one of the parties involved could result in the delay of closing for up to a month.

Experts said that lenders who own bank owned foreclosed homes and short sales do not want to take the risk if they know that they are about to lose money on sales deals.

Last July 9, the Mortgage Bankers Association released data showing that FHA loans accounted for 35.9 percent of all home loan applications, representing an increase of 530 percent since August 2005 during the peak of the housing market.

Experts pointed out a looming demand for FHA loans, adding that the market should find ways to accommodate them as volumes of real-estate owned and short sales are expected to flood the market soon.

They suggested some ways to improve the chances of FHA buyers despite difficulties experience by sellers of repossessed homes. They advised buyers to obtain a pre-approved FHA loan from a major bank. Most often, sellers and listing agents of distress foreclosed properties will ignore pre-approved commitments or letters from second-tier banks.

In cases that a foreclosed home has safety and health issues, buyers should make sure to offer a loan contingency based on FHA 203(k) renovation mortgage. Additionally, buyers should make an offer that is based on a 45-day closing timeframe instead of the standard one month.

They explained that the 45-day closing timeframe may not be advantageous to look at but it would show sellers that homebuyers do understand the delays in the financing market.

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