Profile picture for Jasonl48

First time advice....

Hi guys and gals,
I have been researching FHA loans and purchasing a home for a few months so I know a little bit about how things work (very little, probably).
I am interested in purchasing a forclosed home with an FHA loan in about 6 months when my current apartment lease is up.
I have used many calculators to see how much home I can afford, and most of them say, around the $150k range.
I make $43k per year, no debt (car/credit card, etc).
By the time my lease is up, I will have about $6k put away for a down payment.
My question is: Is this enough for me to get qualified for an FHA loan and purchase a (roughly) $150k house?
This is what all of the calculators tell me, but I guess I just want some "human" reassurance before I waste anyone else's time. 

I heard buying a forclosed home is rough, you get rejected/better offers are put up, etc… Even if I do get approved, do I stand a chance in the forclosure market with my down payment?

Just thought I would ask some professionals before continuing…

Any feedback is appreciated.

Thanks! 
  • December 13 2013 - Los Angeles
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Answers (13)

Why a foreclosure when thousands of standard sales are on the market?

It sounds like you're on the right track and don't see why you wouldn't be able to purchase.
.

Judith Santillan

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  • December 29 2013
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Profile picture for amani ghouleh
Congratulations on planing to buy your first house and remember; first house is always a first step toward your growing real estate needs.
 
I often hear buyers asking for a foreclosure when they really are looking for a good deal.
While there aren't many foreclosures still around but great deals are still there to find. If you are looking only at foreclosures then be prepare as the process is more time consuming, you will be faced with few rejections, disappointments and you might over bid on the property you like only to end up paying close to market price for it. My advice is never be on your own, team up with a realtor who knows his market and is a good negotiator. He will find you the best house for your money. 
I'll be happy to answer your further questions,

Amani Ghouleh
Baird & Warner
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  • December 17 2013
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Profile picture for wetdawgs
Most likely they bought all cash and major repairs were needed.     These are often not "deals" after you figure out how much the repairs cost especially if you have to contract out the repairs.

Occasionally one can find a fixer upper where you can live in a tiny corner  and (if you have the skills) slowly fix it up over the years as you can afford the cash.   You won't want to invite your mother over for several years, and you won't have a social life unless your friends are skilled in the trades and you buy them a lot of pizza and beer.

many of the apparent bargains do not have a C of A, so you'll not be able to live there until you've done major repairs.



  • December 17 2013
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Profile picture for Jasonl48
Thanks for all the great feedback and advice everyone...

I was wondering how I can get a deal like this: http://www.realtor.com/realestateandhomes-detail/2277-Larch-St_Simi-Valley_CA_93065_M10613-09818

http://www.realtor.com/realestateandhomes-detail/2391-N-Fernview-St_Simi-Valley_CA_93065_M10860-54404

I don't even care that it has 3+ bedrooms and is 1700+ sq ft.
I just need 1br and 1ba for that price and I will be happy.

It seems like they went to way less than it should have? 

I am thinking they were bought all cash and maybe some repairs were needed...
There are some other ones like these on the recently sold list in Simi Valley as well...

Are these like finding a needle in a haystack?
  • December 17 2013
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Profile picture for JoshBarnettREIB
First Part:  With today's standard you will need a minimum 4.5k down on a down payment for a 150k house.  With your salary info, you may want to think about 130k house more than 150k house.  Factor in also about 1% of annual home maintenance, still being able to go on vacations, etc, etc.  You do not want to be house broke.  

Second Part:  Yes, with your down payment you can buy a foreclosed home.

Don't forget to use a Realtor Member in your purchase also.  
  • December 13 2013
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That sounds like a good plan to me. I have buyers to it all the time. What's more, you can even up your offer a bit and have the seller give you money back in the form of a seller concession to help pay for closing costs. Good luck.
  • December 13 2013
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go for the home you can afford... there is no benefit to a foreclosed home... that is a myth... look at all homes available to you that will accept an FHA loan... get qualified with a mortgage lender now and be ready to shop in 6 months... be prepared... good luck
  • December 13 2013
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One key thing to realize about FHA loans is that they only require 3.5% down. Along with that you will also need to cover closing costs, fees, and still have left over bank reserves (meaning your bank account can't be wiped out). I usually recommend people to have 5%-7% ready with FHA loans because that will include the other costs as well. Either way, the best thing for you to do is to speak with a lender directly to see if you can get started on financing a new home. There are lenders like myself that would be glad to speak with you to help you get the loan that you need. Well I hope this helps! If you have any further questions or if you would like a loan, feel free to contact me!
  • December 13 2013
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Jason, I only can agree with my follow real estate professional and have not much to add to. If you buy with an FHA loan in this market and a Foreclosure you need to stay in your price range. Many times you will have to make a full price offer to stay competitive with cash buyers. Do not ask for to many concessions from the seller. Many times your agent can find out if there is a multiple offer situation upfront. Be prepared for a longer house hunt. Many times here in South Florida I worked with buyers for over six month, submitting multiple offers until they had success with their offer after a long house hunt. 

Good luck to you,

Annett T. Block
Florida connects Inc.
  • December 13 2013
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Hi Jason, Congratulations on your decision to purchase your home. Brad Davis' comment is very comprehensive and had he not said what he said, I would have. Thanks Brad. There is one thing I'd like to add though, if the foreclosure has issues where repair is required, FHA isn't necessarily out of the question. The property can be "less than good" as long as you are willing to purchase it. How? There is a supplemental program that you may be able to qualify for that will allow you the flexibility and ability to potentially still purchase your new home. It is called the 403k loan which gets tacked onto your regular loan to purchase. There are stipulations and requirements for that supplement that you need to discuss with your mortgage broker or mortgage lender as this supplemental product may or may not be available in all locations. My understanding is that it's still available here in Southwest Florida. It's something to think about if it applies in your situation. Regardless, FHA is a great product. Be patient with all the little loops they'll make you jump, but it's worth it if you don't have a 20% to work with as with a conventional loan.. Let me know if this helps shed some more light for you with a little click on the "thumbs up" here. .Merry Christmas and good luck with your real estate goals. -Edward.
  • December 13 2013
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Profile picture for Sally English
As to a first time buyer purchasing a foreclosure - in my market (Atlanta) there are fewer foreclosures and the ones I see need a lot of work.  Not something I recommend a first time buyer tackle.  You would be better served looking for a more "traditional" distress sale: relocation, divorce or senior transition type sale where there is a motivated seller AND you will have the opportunity to ask the seller to make the necessary repairs for defects and deferred maintenance.

As a first time buyer who is slightly cash strapped  - you can purchase a home using the above strategy that has a lower likelihood of needing serious maintenance or repairs in the first year.

When buying a home
1. Hire a good home inspector ($350 to $500 in the Atlanta market)
2. Ask the seller to make repairs to defects and deferred maintenance that the home inspector discovers
3. Ask the seller to include a 1 year home warrantly insurance contract ($400 to $550 in the Atlanta Market)
Good luck!
  • December 13 2013
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Hi Jason,

First of all, congratulations on your decision to become a first-time homebuyer! Also it's great that you have been researching on your own - I'm sure your realtor will appreciate you putting effort into learning about the homebuying process.

The first thing that comes to mind is that finding a home for 150K in the Los Angeles area is going to be difficult, foreclosure or not.

Buying a foreclosed home can be tough because of many reasons. Investors/flippers with all cash offers can swoop in and outbid you. Also, the condition of many foreclosed homes will not be good, in fact, sometimes you cannot even see the inside of the home until after getting your offer accepted. I'll save the horror stories, but think fist-sized holes in every bedroom and all copper wiring pulled out...

Lastly, you would not be wasting anyone's time! This is what we real estate professionals do. Also, even if you might not be able to buy a property immediately, working with a realtor and lender will guide you and keep you motivated so you will be one day. Let me know if you have any questions as well.

Good luck and hope you become a homeowner in 2014!
  • December 13 2013
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Profile picture for Brad C. Davis
There are a few things to consider.  First of all, if you are purchasing a home using an FHA loan, you will need to put down 3.5% of the purchase price of the home.  On $150,000, this comes out to $5,250.  On top of that, you will have closing costs of approximately 2.5-3%.  This comes up to an additional amount of at least $3,750.  The seller may be willing to pay a portion of your closing costs, so that isn't a solid number.  It is a variable.  To be on the safe side, you would need to have at least $7,500 to put towards the house.  Also, the lending institution is going to want you to have an additional amount in your checking/savings account so that the purchase of the home doesn't completely wipe you out of money.
Another thing to consider when getting an FHA loan is that the home has to be in pretty good condition.  Also, FHA only lends in certain areas.  USDA loans in rural areas (areas with lots of farms, etc..) and FHA lends in more suburban areas. There is also a cap on how much they will lend, which varies by zip-code.
Your best bet is to sit down with a local lender (lender familiar with the area(s) you are interested in) and let him give you the guidelines that you need to follow to meet your goal.
 Hope this helps.
  • December 13 2013
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