When you are filling out a residential mortgage application for a foreclosure, you must be careful to build in terms that will protect you from exposure to common problems with bank-owned properties. Among these problems are poor inspection grades and the need for repairs to the property.
Protect Yourself from Lemons
Placing an offer to purchase a foreclosure property is a risky maneuver. During the inspection process, certain issues may be discovered that can cause you to back out of the contract. Foreclosure properties often are unmaintained or even damaged. Therefore, in your mortgage application, assure you have to go through with the loan only if you execute the house contract. In your house contract, assure you are on the hook for payment only if the property passes an independent inspection.
Gain Financing for Repairs
Nearly all foreclosure properties will need some repairs, even if they are free of drastic problems. Make sure your mortgage loan is high enough to cover not only the purchase of the property but also the cost of these repairs. If you do not want to expand the limit of your mortgage, ask the bank to include an allowance for repairs in the sales contract. This will put cash in your pocket upon purchasing the home.