Would you like to buy a foreclosure and save $100,000? Fannie Mae and Freddie Mac are trying to reduce their huge inventory of foreclosed homes by by offering to pay some of the closing cost, financing renovations and repairs, and allowing 3% downpayment.
This will offer an incentive to first-time home buyers and those wanting to buy up. If you buy and Fannie or Freddie-owned property rather than a regular sale property in the same area you could save up to $100,000.
Even thought foreclosures are usually in the less desirable areas, bargains can still be found. It is more difficult to buy one of these homes as the better ones go quickly and there is very little negotiating power since these properties will go quickly.
3% down on a 30 year loan at the market mortgage rate, and no private mortgage insurance is a big savings. On a $300,000 mortgage this is around $51,000 saved up front and $2,500 a month on the insurance. However for a buyer putting down 20% which doesn’t require mortgage insurance, the payments would be a little more than $300 per month.
Fannie and Freddie are offering an optional mortgage that will include up to $30,000 worth of repairs and improvements. The risk is that if prices continue to drop, with the extra mortgage and low down payment a buyer could end up owing more than the home is worth.
If you are buying a foreclosure owned by Fannie and Freddie to live in it, you will be allowed entry 15 days before the investors who intend to use them as income property. You will also be able to enter them unlike a lot of foreclosures on the market. This will give the regular buyer an opportunity to buy without competition from cash investors.