So What is the Best Option: Hud Homes or Bank Owned Properties?
Posted on October 23, 2008
Filed Under Preforeclosures Short Sale |
Buying foreclosures still is a smart investment. You just have to be on a lookout for the best deal. You can choose the one that best suits your preferences from a wide offer including HUD homes, VA houses, foreclosure homes, distressed properties, bank owned properties and other real estate foreclosures.
Many people donât know what to do when they have to choose between placing their money in HUD homes or in bank owned properties. HUD homes fall under the bigger category of government foreclosure homes, thus being government property, while in case of bank owned properties the title is self-explanatory and easier to understand.
Bank owned properties, also known as bank foreclosures, are real estate properties owned by a bank following a property foreclosing process. The foreclosure proceedings get started the moment when the owner has financial problems and is in default with mortgage payments. After taking ownership of the property, the bank would have all the arrangements done for an action in order to sell the property and recoup its losses. When considering buying bank owned properties, you should also know that there are three ways of achieving them: as pre-foreclosures, at the auction or as REOs (real estate owned) properties.
Purchasing bank owned properties is the most popular way to buy foreclosures, because it involves less complications and risks. Locating bank owned properties is easy. Look in the newspapers classifieds, call the banks or read the public notices at the county courthouse. These methods are all time-consuming though. The easiest way is to use a good online listing service, such as foreclosureconnections.com. Search through their extensive listings for the properties that meeting your investing criteria, price range, size and style. As an investor, you can buy bank owned properties at a 15-20% discount and earn 35-40% in return, thus making a tidy profit. As a home buyer, you are more keen on buying below marketed value with a low down payment, low interest rates and reduced closing costs. All these items can be negotiated with the bank as the lender. Most people are thrilled by the fact that there are no liens or judgments to contend with, no homeowners or tenants to evict, and no back taxes due. Moreover, accessing bank owned properties for evaluation and inspections is quite easy.
The bank is also involved when buying HUD homes. The American government, through HUD Department, encourages mortgage lending by guaranteeing mortgage payments on homes that meet certain standards. In case of ownerâs default on this mortgage, HUD pays the balance on the loan and the ownership is transferred to HUD, thus becoming a HUD home or property. Then, the asset is sold at HUD homes public foreclosure auctions at a price lower than the market price. In case of HUD homes, the government does not provide financing support, so the buyer has to find alternative financing solutions through banks or other real estate financing organizations. Some of the advantages associated to buying HUD homes refer to low down payments and more flexible credit requirements. The buyers of HUD homes can ask HUD to forfeit some of the real estate commissions, financing and closing costs. Since most HUD foreclosures can be of low to moderate value, substantial repair works might be needed and HUD will lend the money to fix the property through a special program.
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4 Responses to “So What is the Best Option: Hud Homes or Bank Owned Properties?”
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What does ‘lease to own’ or ‘rent to own’ mean?
Some home owners rent their property with the option of lease to own. A part of the rent goes towards the actual rent, while a part of it goes towards the equity of the house. Is the renter supposed to buy the house after a couple of years (say 2 years) by paying one bulk amount towards the remainder equity? Or can the renter continue to pay small amounts towards the equity each month until (say in 20 years) he/she has 100% equity? I want to buy a house eventually but I do not want to finance from bank. I want to keep paying small amounts from the rent towards equity directly to the owner. Do some landlords make agreements like that? My landlord wants to sell me her house, so I want to ask her if she will make an agreement like this with me. THank you in advance for your responses!
You effectively have two contracts: a rental agreement, and an option to buy. Usually the option is non-transferable. That is, if you do not exercise the option, you cannot sell it to someone else. A lot of times you exercise the option after you have paid long enough that a mortgage company is willing to give you a mortgage for the remainder, and you buy the house. Sometimes the owners like having that income, and they effectively hold the mortgage themselves.
If your landlady wants to sell you her house, why don't the two of you go together to her lawyer's office and discuss it. Seems like it ought to work.
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i think, lease to own means '' you buy a house and lease it on rent and pay from your pocket to bank untill home loan finished. Mostly, home value doble after 5-7 yrs. so, ur rich after that. rent to own means '' you live in it and pay to bank = rent + from your pocket''. same thing after some time it doubles and you are rich.
you can do this , if ur single and clever: buy a big house and rent it all except a small room for you. if still you are able to pay all loan amount without ur pocket. u have done that.
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Typically lease to own is designed for you to rent the property for a designated time period. The rent payments are generally higher than the going rent in the area. The difference between the rent amt and the amt you pay should be applied toward the down payment. It is for you and your landlord to decide how long the period will be before you must exercise your option to purchase.
At the time you exercise your option to purchase some mortgage lenders may allow you to count the amt that exceeded the rent to be applied to the down payment in determining your amt actually invested. I suggest you retain all of your cancelled checks in order to show you have actually made these payments.
In some cases if you have been in the property more than 1-2 years the lender may also elect to treat the transaction as a refinance. You then will enjoy the benefit of a possible higher appraised value as opposed to the amt stated for purchase on your contract.
These guidelines vary from lender to lender and are always subject to change.
Your best bet is to contact a knowledgeable loan broker that represents numerous lenders to discuss what your options may be at the time you exercise your option. Again things will change but the knowledgeable loan officer should be able to guide you in a direction that you will benefit from down the road. Good Luck
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25+ years underwriting mortgage loans