Can I Get a Home Loan for a House at Auction?
My husband and I are "first time home buyers" and we are looking into buying our first home at a local auction (the homes have been foreclosed and will now be auctioned off). At the auction, would we need to;
A: just have this money laying around in order to buy the house, or;
B: would we be able to be get a home loan / mortgage prior to the auction?
Thanks so much! I really look forward to hearing from you!
- loanmasteroneLv 71 decade agoFavorite Answer
You need to get pre-approved before you go to the auction. If you have the address of potential house you would like to purchase, by all means spend a little time going by and checking them out.
The auction normally have a list they will send you or you may download from your computer.
Now about that pre-approval (Not Pre-Qualified) You do not have to go through a real estate agent to purchase a house, you may buy your house from a For Sale By Owner (FSBO) or an auction.
When you go to the auction make sure you take your pre-apporval letter with you.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book. Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I hope this has been of some use to you, good luck
- johnjanetlLv 41 decade ago
Basically you just need to be pre-qualified and submit an approval letter. However, if you do not have a contractor in the family or someone extremely handy with alot of free time that is willing to work for free....a forclosure auction for a first time home buyer is extremely risky.
It may seem like a bargain at the time, but some people are stripping and tearing up their homes before vacating after foreclosure. If the home was in great shape and didnt need any work, most likely it wouldnt be up for auction.
Dont bid on a home that hasnt been inspected.
- acermillLv 71 decade ago
You CAN do as you are contemplating, but you would need to get a lender to appraise the property and approve you for the needed loan in advance, such that you can immediately close the deal after the auction.
Foreclosure auctions do not consider whether or not you have cash on hand. They only want proof that you can close the deal which you have negotiated shortly after the auction sale.
Do NOT consider bidding at these auctions unless you KNOW that you can come up with the financing needed.
- 1 decade ago
Most auctions will REQUIRE you to be pre-approved before you can bid.
Warning to you is that auctions aren't always a bargain. Usually banks will receive a much higher profit than just selling in open market.
So if you are going to buy a home - get pre-approved. As a first-time home buyer prepare for high interest and/or initial credit rejections.