About foreclosures... Most likely the homes you are going to be looking for are HUD homes. And it's important that you know how a home becomes a HUD Home. Someone that had an FHA Insured loan, defaulted on that loan and was foreclosed by their lender becomes a HUD home. The lender in turn collects from FHA (Federal Housing Administration) any losses they incurred from foreclosing. FHA is part of HUD (Housing and Urban Development). HUD in turn eventually gets the deed to the property and offers it for sale to the general public.
The reason lenders can recover their losses is that everyone who gets an FHA Insured loan pays what is called â€œmortgage insuranceâ€. These insurance premiums show up on your settlement sheet as an initial premium, which is usually added to your loan amount and then an additional monthly premium is added as part of your mortgage payment. These premiums go into a fund to payoff lenders.
Now that you know how a home becomes a HUD Home, you need to know that it takes 6-12 months for HUD to get the deed so they can evaluate and sell the home. It takes the lender 3-6 months to complete the foreclosure process and another 3-6 months to get reimbursed by HUD so HUD can get the home, inspect, appraise the property and put it on the market. All the while the home is usually vacant; this total timeframe could easily be 12-18 months from the date of foreclosure, but 8-12 months is probably the norm. All these and more are reasons that HUD sells homes strictly on an â€œAS-ISâ€ basis.
I hope this information has been helpful!
Cathy Chapman, Broker
Signature Home Sales, LLC