A brief overview of the financing options available for buying multi family homes in foreclosure.
If you have considered buying multi family homes in foreclosure, your financing options are plentiful. In fact, you have just as many options as you would if you were purchasing a single-family home. There may, however, be some unique applications of these financing options when pursuing multi family homes in foreclosure, and care is advised.
The vast majority of multi family homes sold in foreclosure are sold through an auction. Nearly all of these auctions are advertised as cash-only auctions, but that can be a bit misleading. At most property auctions, you will need to have cash (in the form of a cashier’s or certified check, money order, or indeed actual cash) as a form of deposit or earnest money when you bid on a property. Typically, the requirement is a 10 percent cash deposit. If you are the successful bidder on a multi family home in foreclosure, you will then have a short period of time to deliver the remaining balance of purchase. To avoid the possibility of bids falling through or bidders reneging, most property auctions require bidders to provide certification of financing for the properties they successfully bid on.
That pre-qualification process for purchasing a multi family home in foreclosure is similar to all other pre-qualification processes for pursuing a real estate purchase. To qualify for financing you generally must have:
- A good credit history
- A stable source of income
- A good income-to-debt ratio
Since a multi family home presents the prospect of an income stream from the rents you may collect from tenants, there may be a few more options available for acquiring funding. If the property in question is going to need some work done, you may qualify for property rehab loans. Many state and federal government programs also have financing options for folks willing to take on properties in distressed economic areas, or for low-income or senior housing.
There are also rare occasions when a private party has a multi family home in foreclosure it’s trying to sell or recoup losses on. In these cases, you may be able to negotiate a small payment towards some of the arrears and the assumption of the original loan.
One of the best options for ensuring you are taking full advantage of the financing options available for buying a multi family home in foreclosure is to enlist the services of a qualified real estate expert versed in the subject. QualitySmith can aid you in this endeavor by connecting you to local professionals with that experience who are willing and able to assist you.