Month: November 2009

If you’re looking to buy a foreclosure property, the following information will help you navigate the waters.

A foreclosure is any property that is in the process of being taken back by the lender. A short sale is when a borrower is selling a property for less than is owed on it.

A real estate-owned (REO) property means that the foreclosure process has been completed and the bank owns the property outright.

These days, the market is full of the aforementioned properties. If you’re looking to buy one, find yourself a good real estate agent who has worked with these before.

While prices for these types of properties are often lower than comparable non-foreclosure properties, keep in mind that the process of purchasing one can be more drawn out than it is when buying a property via conventional channels.

Lenders must approve the sales, and with the volume that many are carrying, it may take weeks to hear if an offer is even accepted. Because there are so many undervalued properties, there may be many bids on each, driving up the price in a bidding war.

Financing a foreclosure is pretty much the same process as financing a traditionally purchased property. The purchase process may be slow at the beginning, but after an offer is accepted many lenders want to close quickly, often within weeks, to get the properties off their books.

New laws have been introduced in an attempt to avoid surprises for borrowers at the closing table in both purchase and refinance transactions

The laws require initial disclosure of fees, and re-disclosure in the event of fee or rate changes.

Traditionally, when a borrower has made application to a lender, the lender, by law, was and is required to disclose certain information.

This information includes two documents.

The first document is called the good faith estimate (GFE).

This shows the rate, the fees and the charges the lender expects to collect in the course of the transaction.

The second document is called the truth in lending (TIL) disclosure. This shows what is called the annual percentage rate (APR).

The APR is a calculation that rolls fees and costs of the loan into the loan itself.

The APR is normally higher than the rate.

So now, if you go to two lenders with the same rate and same loan amount, the APR given by each one will
be determined by the cost associated with the loan.

You can now compare apples to apples.

Now, before lenders can charge you any fees, other than for obtaining your credit report, they must receive from you, in writing, a statement that you acknowledge what they are proposing to you in the way of fees and APR.

If there ends up being a change in the loan amount, or a rate or fee change that results in an APR change of greater than one-eighth of a percent (.125), the lender must re-disclose this.

Under the new laws, borrowers also now have a minimum of three business days to review and approve the changes before the file can go to closing.