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Buying Government Foreclosures - Tips and Advice
By jason | March 14, 2008
Buying government foreclosures can be a very effective way of finding great deals on apartments, houses and even commercial real estate through the foreclosed properties market. However, many buyers are unsure as to the actual definition of what government foreclosures are, or whereto find them. It’s important to understand where government foreclosures actually come from in order to understand how you can actually buy them for the best prices, so here’s a quick crash course.
Every year, the government sets aside a certain amount of money to fund banks and other lending institutions with so that they can in turn provide that money to aspiring homeowners in the form of mortgage loans. When a homeowner applies for a mortgage, they may be allowed to do so as a result of those funds, and thus these types of properties are often referred to as government homes.
Certain homeowners may have access to these properties for different reasons. One of the most common is low income. The government wants to encourage homeownership, so many of the loans they fund are for borrowers with bad credit or the inability to provide any kind of substantial down payment on a home. In fact, there are several government agencies devoted entirely to promoting homeownership through these means, known as the Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA). Both HUD and FHA are responsible for awarding many of these home loans each year, and thus are considered to be in charge of them. Another lender is the Department of Veteran Affairs, which provides loans to veterans of wars at discounted rates.
When a homeowner goes into default on a government sponsored loan, it is up to the appropriate government lender to seek to collect the debt through government foreclosures. To enact government foreclosures, the appropriate agency will repossess the home in question and sell it through a public auction.
Often times, government foreclosures can be extremely lucrative for investors and homebuyers. Since the government oversees the loans, they are rarely inflated in value, as many other properties bought through mortgages have been in the past 10 years. This means that the money they need to sell for at auction to satisfy the loan debt is often less for government foreclosures than other types of foreclosed properties.
Government foreclosures offer some great chances for discounted investment as a result, since you can get great discounts off market value off already low-priced mortgage sales. If you’re serious about foreclosed properties investing, and willing to do a little extra legwork to find specifically government foreclosures, buying properties from HUD, FHA or any other outlet can be a great option worth considering.
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Topics: Government Foreclosures |