How to Finance a Foreclosure

hello Internet my name is Ryan Ingram and there are exactly two things that stand between your foreclosure and traditional financing the first thing that would prevent you from getting traditional financing on a foreclosure is access to the interior so another video that I just recorded how to find and buy a foreclosure in that video we discussed the three parts of the foreclosure process the pre foreclosure the actual foreclosure and then the bank owned HUD part in all three of those steps so in the pre foreclosure you might actually have access to the interior if you have access to the interior then you're able to do an interior appraisal which would qualify or that's a requirement that the bank will need in order to approve your loan on the foreclosure so if it's in the pre foreclosure process and you actually know the owner or the person that's being foreclosed on and you can get into that property if you have their contact information they're ok with it if they're trying to sell it to you prior to them actually being foreclosed on then it is possible for you to get traditional financing because you have access to the interior when you're in the second stage of that foreclosure process when you're in the courthouse then there's a very very slim chance that you possibly have access to the interior so as it's being foreclosed it's not really owned by the bank it's no longer really owned by the occupants then access to the interior is very limited so a bank won't be able to get in there appraise it make sure everything's good figure out how much work is needed if it's livable any of that so since all of those are unknowns then a bank is not going to lend you money on that property now in the third stage of the process when it's bank owned or owned by HUD then there is a chance that you do have access to the interior so if it's bank owned or a HUD property then you probably have access to the interior which means that interior appraisal could be done which means you might be eligible for traditional financing the second thing that might prevent you from getting traditional financing on a foreclosure is the timeframe when somebody's being foreclosed on it happens quick they've been receiving notices there is a court date that's imminent time is essential it is everything in the foreclosure process so you're gonna want to get this done as quickly as possible and if you've ever purchased a home using traditional financing you know that they are not fast when they tell you 30 days you can expect 60 days when they tell you 60 days you can expect 90 days - all of my friends are their lenders then I am sorry I do not mean to speak ill of you but you know you are slower than you say it is a fact of life and that's something that we all live with which is the second reason that it is difficult to get traditional financing on a foreclosed home because foreclosures happen fast there's a court date there are so many things that have to be done in a short amount of time traditional financing there's just not the comfort of time in the pre foreclosure part of the process then everything is a little bit unknown the individual could notify the bank that they're gonna sell the property and the bank might cool off they might say okay we're gonna give you one more month if you're actually proving to us that you are trying to sell this house again creative financing there's a lot of gray area that you could move around in and help that person prevent the foreclosure from happening and prevent the bank from having to take possession of the property and in all the fees so that's a possibility it might happen now during the actual foreclosure at the courthouse you have to put in the deposit for the property there each courthouse probably has different requirements as far as the down payment or the deposit as soon as you win the bid the few that I've purchased we had to immediately give around $5,000 and then it was just a matter of the legal things being completed for the bank to take possession or the bidder to take possession so once that is in route then it's very difficult for a traditional lender to operate within those time constraints and get you that loan from the beginning now in the third process when you have access to the Interior and you have time frame if you're actually working with a realtor that the bank has contracted with to sell the bank owned property or if you're working with a realtor is approved to do business with HUD then there might be enough timeframe to actually get traditional financing on that bank owned or HUD property the other ways that you can go about financing your foreclosure is you can do cash now this one's pretty simple I don't have to say much about cash you take money out of your pocket and you give it to the owner and you walk away with the property this is my favorite method because it's quick it's easy there's a lot of speed behind it and people really appreciate speed especially distressed owners or banks which are arguably distressed owners when I buy a property in cash what I do is I get the property stable I make sure I have interior access I make sure I fix everything and after that then I will approach a bank and attempt to refinance that property and get it on a long term low interest rate mortgage the second thing you could do is use hard money and arguably the third thing that you could do is private money now hard money is kind of like a lender they are an institution an individual someone that has access to capital that might not necessarily be theirs and they're willing to give it to you when I say hard money the way I differentiate between these two is hard money they charge origination fees they charge points a point is 1% so if you do a hundred thousand dollar loan one point would be a thousand dollars so the hard money lenders that I'm aware of they charge anywhere between one and five points so you could in order to get the money to buy the foreclosure you might pay anywhere between a thousand and five thousand dollars to use that money when I say private money what I mean is like a friend a family somebody that knows you understands the business that you're in and they're willing to just give you the money so if a property costs a hundred thousand dollars they will give you one hundred thousand dollars at a predetermined interest rate in my explanation in my view of it private money is cheaper now both of these people may have conditions if it's a foreclosure and nobody really knows what the inside looks like because the last thing you want to do is take money from a friend and just have kind of a Russian roulette thing going on of what's behind the front door the property that I had I had no idea it was gonna cost $40,000 to fix it up fortunately we had the cash available to actually rehab that property to get it to a nice place to live but that might not be the case for you so I would say most certainly do your due diligence as much as possible and then you're not supposed to trespass but if you are able to get away if it's vacant and you think you have the ability to not trespass but see inside the windows to figure out what exactly you're working with again even if you can see inside the windows what you're able to see is very limited it's not a good representation or accurate of how much work is needed so when you're playing in the foreclosure arena just make sure that you are prepared for the worst and you have enough capital to take to completely redo everything before I recorded this video I actually reached out to a hard money lender and I asked him what his expectations or rules regarding foreclosed homes are he said that whenever he is lending on the foreclosed home he is going to assume that the property needs everything on the inside if you have a good exterior picture then you know we could assess the exterior from that point to see if anything is needed to account for a new roof new paint anything along those lines but as far as the interior goes since nobody knows what it looks like he's gonna budget everything so let's say the property is a $200,000 home this is the exact example that he gave me $200,000 home he's willing to do 70% of the after repair value which would take you to a hundred and forty thousand dollars so if everything were perfect on this property then he would lend you a hundred and forty thousand dollars for the purchase price plus the rehab however assuming that it needs everything let's say a complete interior gut conservatively we'll be 40 grand then now you have a hundred thousand dollars left for the purchase price so if you're financing a hundred thousand dollars for the purchase price and the fee is five points for doing the loan then you're looking at the five thousand not to mention you still need to put the 25 percent down on that loan so that's gonna be $30,000 out of pocket does that make sense I hope that helps so that's the rundown of how you can finance a foreclosed property so if you haven't already please go back and watch the how to find and buy foreclosed homes video and again this video came from you guys asking me questions and follow-ups about the videos that I'm posting so I really appreciate that keep the questions coming thank you guys can't wait to talk to you soon thanks and happy Friday if it's still Friday when you're watching this otherwise I hope you have a great weekend or just a great day on whenever it is that you're watching this okay thanks

Channel: Ryan Ingram

Views: 31,163

Keywords: How to finance a foreclosure, how to fund a foreclosure, types of loans for foreclosures, loan for foreclosure, loan on foreclosure, traditional finance on foreclosure, how to buy a foreclosed house, how to buy a foreclosure house, how to buy a foreclosure, investing in real estate, foreclosure investing, buying foreclosed homes, pre-foreclosure investing, pre foreclosure investing, how to buy a foreclosure with cash, real estate foreclosure, ryan ingram, foreclosures

Id: u9RyD_70Gh0

Length: 9min 37sec (577 seconds)

Published: Fri May 08 2020