Real Estate FAQ
What is the difference between a HUD Home and a Foreclosure:
A Foreclosure is also known in the industry as an REO property (Real Estate Owned). REO is the term the banks use for properties they have taken back through a foreclosure action. REO or foreclosures are OWNED by the bank. HUD Homes are simply REO or foreclosure homes that were originally purchased/financed with an FHA mortgage. FHA loans are federally insured, so if the bank takes the home back through foreclosure, the federal government will buy the home from the foreclosing bank. Then, the federal government owns the home and the home is referred to as a HUD home.
What is a Short Sale:
A short sale occurs when a lender holding a mortgage on a home agrees to accept less than the full payoff amount and releases their lien on the home. There are many ways a short sale can be structured, but here is how the process normally works... A home seller realizes they can no longer afford to stay in their home due to job loss, illness, job transfer, etc. Based on current market value, a sale of the home will yield less proceeds than what is currently owed on the home. The seller lists the home on the market at current market value and obtains a buyer for the home. The owner of the home then works with the listing agent to contact the lender on the home and requests the lender take less than the amount owed on the home and release the lien. The lender requests information from the seller to verify that they can no longer keep or afford the home. Once the lender is satisfied this short sale would be more beneficial than taking the home through a foreclosure action, the lender will approve the short sale and the transaction will close. Not all lenders approve short sales, and not all lenders forgive the deficiency. Each case is unique. Some short sales take as little as 30 days to close and some can take as long as 6 months or more, with the average short sale taking 120 days. Please CONTACT US if you need assistance with a short sale. We can help.
How can I calculate property taxes on a home I am thinking about purchasing?
We have a link on our website under "Buyers/Sellers" to assist with the property tax calculation. You will need the current SEV of the home which you can normally get online from the taxing authority (city, township, county) online records. You will also need to know the school district.
Why do I need to be pre-qualified before looking at homes?
Many of the homes on the market are foreclosure or short sale homes. If a bank is selling a home, or considering a short sale for a home, they always want to see evidence the buyer is capable of purchasing the home prior to responding to any offer. The banks and many homeowners will not even consider an offer without a pre-qual letter from the buyer's lender attached to the offer. If you are in a situation where you fall in love with a home and would like to purchase the home, valuable time will be lost waiting for the lender to issue a "pre-qual letter". Banks often make decisions within hours and they will not wait for someone to get their finances in order. If you are not pre-qualified for a loan and/or have sufficient finances in place to pay cash, you will not be taken seriously as a buyer. Get pre-qualified for the loan first and you will not only be ready to make a quick offer if needed, but you will also know what type of offer to make (ie. are seller concessions required? will the loan be FHA, RD, FHA-203k, VA, MSHDA, Conventional, etc.? what conditions are required for the appraisal? etc.). Without all these questions answered up front, you will not be able to make an effective offer.
Can I finance a home for $30,000 or less?
Unfortunately you can finance a car for almost any amount, but you will have a hard time financing a home for less than $40,000. The reason primarily has to do with state and federal limits on amounts lenders are allowed to charge for loan closing costs. Because lenders are limited on the "percentage" they are allowed to charge for finance charges on a mortgage, they will actually LOSE MONEY when lending less than about $40,000 on a home. The lender needs a certain amount of money to cover the expenses involved in closing a loan. When the loan amount is too low, the percentage of that loan amount they are allowed to charge is lower than their actual expenses. Thus, doing the loan will cause them to lose money. The numbers vary with current interest rates, buyers credit, down payment, appraisal costs, and other loan costs. Unless you have a relationship with a lender in which they are willing to lose money on a deal in order to keep you happy, you will have a hard time finding a lender to loan money on a lower priced home.