You've already gotten lots of offers of help, but I agree with folks...a single family, detached home for under $200k doesn't exist in Aliso Viejo or really in the surrounding area. You could find a one bedroom condo or maybe a one bedroom and loft or smaller two bedroom condo, but that's about it. Not that those are bad options. I've seen lots of condos with better floor plans than a SFR. It just depends on what your needs are. If, for instance, you are open to manufactured homes, your options open up a bit in the lower price ranges.
As for the foreclosures...here's my take on it all...there are plusses and minuses to all transactions whether they be standard, short sales or foreclosures...if you are looking for a house to be your home, find the place that is right for you and then together with your agent, work through the rest of it. As long as you know what you may be facing ahead of time with the different types of sales and you can live with those differences, go for the best home you can find!
Best of luck to you.