Facts about Pre-Foreclosed Houses
Why do properties go into pre-foreclosure?
Rising unemployment causes mounting debt and an increasing number of homeowners
are subsequently unable to make their mortgage payments. Refinancing may be unfeasible
when owners can’t show the bank how they can make future payments. When this happens,
the property in question goes into pre-foreclosure.
What happens during the pre-foreclosure process?
During the pre-foreclosure process, the lending institution notifies the owners
that the foreclosure process will start unless payment is made. Pre-foreclosure
buyers can help these down-on-their-luck owners and save money simultaneously. Once
you understand the owner's circumstances and built a trusting bond, you’ll be better
able to negotiate a deal that is beneficial to both parties.
What are the advantages of buying during the pre-foreclosure process?
One of the biggest advantages in buying a pre-foreclosure is the price. Home owners
in pre-foreclosure are usually very motivated to look for home buyers to buy their
house. Concerned about dire long-term financial consequences, pre-foreclosure home
owners are willing to sell their properties for under market value, as long as they
can sell it for more than their mortgage balance.
What do I need to do before I bid on a pre-foreclosed house?
Before you buy a pre-foreclosure, you’ll need to qualify for a mortgage. Mortgage
companies use ratios to analyze your mortgage payment. Mortgage companies will calculate
your ratio of monthly income to your proposed monthly payment. Lenders will typically
deem you a foreclosed house worth about three times your total gross annual income.