Buying FHA Foreclosure: Is It For You?
Buying FHA foreclosure is a good investment in the sense that you get to purchase a property below its market value. But what exactly is FHA foreclosure?
The Federal Housing Administration (FHA) loans
The Federal Housing Administration (FHA) is a unit of the federal agency, Department of Housing and Urban Development (HUD). One of the functions of the FHA is to insure mortgages. If a homeowner reneged on his responsibility to pay his monthly mortgage on a home loan that was insured by the FHA, the defaulted loan will be paid by the HUD to the lender. The HUD will then legally repossess the distressed property.
The repossessed property will then become a government foreclosure. The property will then be sold at an auction by the HUD to recover the money that it has released to pay the lender.
Merits of Buying FHA foreclosure
One of the advantages of buying properties foreclosed by FHA is their prices which are usually below the market value. Homebuyers can buy and rehabilitate government foreclosure properties to make a profit, and sometimes enjoy tax breaks in doing so.
FHA advice to Delinquent Homeowners
Meanwhile, the FHA has offered suggestions for delinquent homeowners on how to avoid FHA foreclosure. Homeowners who feel that they could not keep their account current should contact their lenders immediately to discuss their financial situation and workout loan plans with affordable payment terms.
Some options that you and your lender may consider are reinstatement of loan, refinancing or loan modification.
If you think that your financial situation will not improve anytime soon, you might consider a pre foreclosure sale. This means that you will put your foreclosed property on the market before it goes into FHA foreclosure proceeding. Proceeds from the sale will be used to pay your debts so as not to damage your credit history.
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| National Overnight Averages | TODAY | +/- | Last Week |
|---|---|---|---|
| 3/1 Year ARM | 3.5% |  |
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| 1 Year ARM | 3.37% | |
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| 15 Year Fixed Mortgage | 4.51% |  |
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