How to buy foreclosed homes for sale / Fannie Mae homes

Buy Foreclosed Properties!

This is a great time to think about purchasing foreclosed homes and Fannie Mae properties. Low rate mortgages and declining home prices make this the perfect time to buy. The following steps will help you understand and complete a foreclosure purchase.

Things You'll Need

• Experienced Real Estate Agent
• Earnest Money/Good Faith Money
• Mortgage Loan Pre-Approval letter or Proof of Funds

Instructions

1. Find a Realtor® who is familiar with buying foreclosed homes or Fannie Mae properties. There is an additional addendum which goes with the contract to buy and sell real estate. A real estate agent familiar with the paperwork will better prepare you for the closing table.

2. Get a home mortgage loan pre-approval letter or Proof of Funds before making an offer on a foreclosed home. Go to a bank or mortgage company and ask to be "pre-approved" or "pre-qualified" for a loan. This is not a guarantee of a loan. However, Fannie Mae and other foreclosure companies will not consider an offer without one of these letters from a lending institution. If you are making a cash offer, you will need to provide "Proof of Funds". This can be a recent bank statement or a letter from your bank. You can also look search for a home mortgage pre approval online.

3. Make a reasonable offer on a foreclosed home. We have all seen the news reports that say you can by a house for 50% off. Foreclosure companies such as FNMA are not going to give you the property. Yes, you can make a lower offer, but discuss it with an experienced agent and decide what percentage is reasonable.

4. Be prepared to have "earnest money". This is good faith money held in a trust account until closing. For most foreclosed homes this will be $1,000 or more. If it is a cash deal, they will require 10% of the purchase price.

5. Understand "Per Diem" and how it can cost you! The foreclosure addendum will require a fee for each day a property does not close and exceeds the original closing date. This is normally $100 per day per diem if it is your fault. This means if you close 7 days late you could be charged $700 extra. "Your Fault" means you, your lender, attorney or real estate agent. If any of these people hold you up, you could be the one to pay. Always make sure your mortgage lender understands how important it is to close on time. Make sure your closing date is reasonable for the type of loan you are making and choose a closing attorney who is experienced with foreclosed homes.

   Update: Some companies are doing away with "Per Diem", but it is still important to ask about it and know if it is in your contract!

Tips & Warnings

• Read your Real estate agreement and addendum carefully and ask questions before making the offer.

• Foreclosed homes are sold "As Is", "Where Is"!! Do your homework carefully before making an offer.