Owning a home is a serious responsibility. It’s for this reason you should ensure your finances are in the best possible shape before you even think about looking at real estate. While cash advance loans may be able to temporarily cover a mortgage payment if you fall on hard times, this loan option should never be part of your long-term mortgage repayment plan.
In addition to monthly payments, there are a number of other expenses that often come with owning a home. For example, you will need to pay for property taxes, insurance and utility costs. While you rent a home, these are added costs you may not have had to cope with.
To take the financial stress off of homeownership, in recent years many buyers purchased distressed properties in foreclosure and through short sales.
Foreclosures often come in less-than-perfect condition, and as a result, many of them have much more affordable price tags. However, the discounted price of foreclosures recently fell to just 7.7 percent of the price of conventional properties, according to a report from Zillow. While this may still yield significant savings, it was well below a discounted price of 23.7 percent recorded in August 2021 following the real estate bubble burst.
“The smallest foreclosure discount is found in places where competition for homes is so high, people there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability,” said Zillow chief economist Stan Humphries. “Additionally, in areas such as Phoenix and Las Vegas, where not long ago one out of every two homes sold was a foreclosure re-sale, buying a foreclosure is no longer just for investors.”
Foreclosures Often Need Significant Repairs
Before you go out planning to purchase a foreclosure on the cheap, you need to understand that you may need to invest a considerable amount of money in repairs to make the property uninhabitable.
When borrowers who enter the foreclosure process learn their home is on the verge of repossession, some of them allow the property to fall into disarray. Since the property is technically no longer theirs, some see no point in investing money to keep it in working shape.
This often weighs heavily on key parts of the home, such as the plumbing, electrical and heating system. These are all parts of the home that can be very expensive to repair or place. In extreme cases, in a disgruntled effort to get back at their lenders, some borrowers intentionally damage the property, which could be up to the next owners to repair.
How To Financially Prepare For Homeownership
Luckily, there are a number of different loan options you may be able to use in order to purchase a foreclosure. For example, the Federal Housing Administration has a type of mortgage that allows you to roll the cost of needed repairs into the balance of the loan.
However, in order to qualify for this kind of mortgage or a more conventional option, you will need to prepare your credit to ensure you obtain the best terms possible.
To get an idea of where you credit standards, order a copy of your credit report. Under federal law, you can obtain one free copy every year from each of the major credit reporting bureaus: Experian, Equifax and TransUnion.
Check this document closely for errant marking, such as incorrect balances and late fees. If you find any, get it touch with your lender and the reporting bureau as soon as possible. This could help you clear up any errors and get your credit standing back where it deserves to be.