How to buy a foreclosed home
MSU Extension and Freddie Mac partner together to help you learn how to navigate this tricky purchase.
A question that is often asked in homeownership education classes is, “How can I purchase a home that has gone through foreclosure?” These homes, known as Real Estate Owned properties (REO properties), are homes that have been purchased by the owner of the mortgage loan at the foreclosure sale.
When considering the purchase of a REO property, it is important to follow these tips:
- Find a reputable real estate agent who is active in the neighborhood you are considering. A good real estate agent can help you find a home that meets all of your needs.
- Before looking for a property get pre-approved by your mortgage lender. You should know the most you can spend on a home; have cash on hand for the down payment, closing costs and any potential repairs or renovations.
- If you see a home you like, be prepared to make an offer. There can be competition for desirable homes.
- Get a home inspection. This is a critical step in any home purchase but most important with REO properties to identify potential issues. Remember you can cancel a contract if you are dissatisfied with the inspection and it occurs within the stated contract time period.
Michigan State University Extension has partnered with HomeSteps, the REO sales division of Freddie Mac, to offer a special incentive through the HomeSteps Buy-A-HomeTM program. Upon completion of the MSUE six hour HUD approved homeownership education class, participants will receive a coupon good for up to 3 percent of the purchase price towards your closing costs on eligible homes purchased from HomeSteps. Go to www.HomeSteps.com to search for the home of your dreams and find more information about the Buy-A-Home program. The Buy-A-Home coupon is good for one year and is subject to terms and conditions.
Also consider taking a free homeownership education class at Michigan State University Extension. These six hour classes are taught by Michigan State Housing Development Authority (MSDHA) certified homeownership counselors and detail all of the steps in the homebuying process. With the successful completion of homeownership education the participant receives a certificate necessary for grant and homebuyer down payment assistance programs from the MSHDA.
The purchase of REO property can be more complex than a typical home purchase but with homeownership education and an experienced lender a foreclosed house can be become a home. Contact your local MSU Extension office for more detailed information and to sign up for a MSUE eHome America class on line or in one taught in your community.