There are a number of people that have made a lot of money by learning how to buy foreclosures. The fact is that it is not that difficult to purchase a foreclosed home as long as you do your homework beforehand. Anyone with the ability to get a loan can get involved.
Be Careful
With the real estate market having appreciated as much as it has over the past five or six years, it is essential to ensure that you get a good deal on a home purchase in order to protect your finances. This is because the real estate market is still at a high point. There is downward momentum but because of the incredible rate of appreciation that has happened, there is plenty of room to fall.
Just look at the math.
If you buy a $250,000 home with no money down, your mortgage would amount to around $2000/month after taxes and insurance. Let’s say that you plan to stay there for 5 years. That would equal $120,000 in mortgage payments. There are tax benefits for this but for the sake of this calculation we won’t worry about that right now. If you have a 7% APR on your loan, you will have built up around $15000 in equity over that time period.If the market drops only 10% over that time period, when you sold your house, it would go for $225,000. You built up $15,000 in equity so that means that you would still owe the bank $10,000 after you sold your house!
And as you can see from this graph, a 10% drop is not out of the question.
Opportunities Abound
The number of foreclosures in the US are on the rise, which presents an opportunity for real estate investors. This rise in foreclosures will cause even more downward pressure on real estate prices, causing a buying opportunity in the market. According to this article on msnbc, “The number of U.S. homes facing foreclosure surged 58 percent in the first six months of the year, the latest sign of mounting problems in the mortgage industry”. A surge of 58% is absolutely incredible. There are so many people that have purchased expensive homes with questionable mortgages. Their loss is your gain.
Where Do I Start?
I will be discussing the simple steps that are required when learning how to buy foreclosures on this site. For now, the first step is to take a look at listings within your area. Foreclosure.com is a great place to start. They have a free trial that you can sign up for so it’s no cost to you to take a peak at what’s available in your area.
