If you’re looking to purchase a home at a bargain, you might want to consider buying a short sale.
What is a short sale?
In a short sale, a lender allows a distressed homeowner to sell their property for less than what they owe on their home loan. This often works in favor of both parties, according to Bankrate.com, since a lender will not have to go through the trouble of the foreclosure process, while the current owner is able to move on. Meanwhile, the advantage for buyers is that you can find your dream home at a discounted price point.
Steps to buying a short sale
1. Start by identifying a potential short sale in an attractive area with an agent. Do a little research on similar properties in the neighborhood and compare the average price of non-distressed sales to the amount of debt left on the home. If the average selling price is less than the loan balance, the lender might be more willing to make a short sale. If the debt remaining is small, lenders may feel they can make more money by following through on a foreclosure.
2. Once you select a home, do a thorough inspection of the property. Short sales often come in less-than-perfect condition and may require some repairs. If it seems the cost of these necessary improvements outweighs the bargain price of the property, you may want to reassess your options.
3. Next, contact the homeowner or selling agent to find out which lenders are involved. Once you have this knowledge, it will be easier to contact the necessary parties to complete the short sale when you are ready to make an offer.
4. Once you find out what lender currently holds the home’s mortgage, it is time to figure out your own financing. Purchasing a short sale with a VA or FHA loan can be very affordable. However, lenders who agree to a short sale may only give you a few weeks to close it once a deal is made, so sorting out your own mortgage situation before entering negotiations is important.
Qualifying for a home loan is a major step in your personal finances. Freedom Mortgage is here to keep you up-to-date on the latest tips and tricks of the mortgage industry whether you’re looking to improve your home value or simply make a mortgage rate comparison.
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