Even when you buy a house at auction, it is very often necessary to ask for a loan from the bank. Let’s see how the home loan at auction works.
Buying a house at auction: advantages and disadvantages
Judicial auctions are an alternative channel to the traditional market for finding good buying opportunities at prices below market prices. Judicial auctions are in fact the result of legal procedures that began with bankruptcy or non-repayment of mortgages or loans, culminating in the foreclosure of a property and its auctioning, so that the proceeds go to the reverse part of the debt. contracted by the previous owner.
Buying a house at auction also has several advantages, including particularly low prices. It is in fact possible to obtain prices that are even 20% lower than market prices. No risks from the point of view of transparency or possible scams, as all information is available on the public sales portal. Even the appraisals are then included in the procedure, which already provides for them, while no notary fees are charged to the buyer of the house at auction, just as no commission will be paid to any agent, given that the purchase takes place in the context of a lawsuit. legal.
However, it must be considered that auction prices are convenient precisely because the property is burdened by the legal consequences of the pending lawsuit. In light of the decree that rewrites article 560 of the civil code, for example, the new owner cannot take possession of the property unless following the decree for its release, issued 90 days after the decree of transfer to the new buyer.
Mortgage to buy a house at auction: how to get it
However, if the property does not present particular problems, it is always possible to award it with a specific loan, which provides for the disbursement of the loan subject to the actual obtaining of the asset at auction. The mortgage for the purchase of a house at auction is in itself no different from any mortgage: to request it, as always, information related to the applicant’s income and guarantees must be attached. In addition, however, it will be necessary to forward to the bank the documentation related to the auction in which the buyer intends to participate and to the property he intends to purchase. Therefore, a copy of the notice of participation, the technician’s report on the property, and the preliminary notarial report must be provided.
If the loan, however, will not be sufficient to cover the entire cost of the purchase, the borrower will have to cover the remainder (with his own cash or with a loan or mortgage liquidity). Even in the case of the purchase of a house at auction, the loan will be facilitated if the property is the main residence, with the related tax benefits.
Mortgage for a house at auction: when it is not disbursed
The agreement between the ABI (Italian Banking Association) and the Italian courts in 2014 is also fundamental as regards the timing of the loan, which must necessarily be intertwined with those for awarding the property. In fact, there is the possibility of stipulating a preliminary loan agreement between the customer and the credit institution in which the actual award of the asset and its transfer to the owner are set as conditions for the disbursement of the loan. A transfer which, we remind you, could soon precede the actual evacuation of the property by 90 days, which could constitute a certain impediment. If all goes well, in any case, the bank undertakes to disburse the loan within the terms set by the court for the balance of the purchase.
In the event that the award or the actual transfer fails, the loan will not be disbursed.
Step by step to rebuild your credit
Well, you’re going to have to show some discipline. And some paychecks. And she dances a few more steps.
a.) Find out your credit score. (Yes, that’s why you see all those TV ads promoting free credit reports.) By law, the three traditional agencies, Equifax, Experian, and TransUnion, are required to provide a free report once a year. Once you see them, do you see any errors? If so, challenge them on the company’s website. Why is it so important that they do it right? Americans who filed for bankruptcy score lower than non-bankruptcy types. The higher your credit score, the less interest you will have on that mortgage payment: 1.5 to 2 percentage points less. (Also, see What Does Credit Score Score Mean?)
b.) Stay at your workplace: This shows a potential lender you can trust.
c.) Rebuild your credit: Get two or three secure credit cards, charge only small amounts, and keep them. Take a small loan, a personal loan, a car, or a student loan, and pay it off quickly. Never make a late payment. Always make an advance payment. Always pay the rent on time. Never bounce a check and constantly deposit money into your savings account. (See also Best Credit Cards After Bankruptcy.)
e.) You Must Learn Patience: If it’s been less than two years since filing for bankruptcy, wait. If you lost your home to foreclosure, it’s longer: you have to wait three years. And the countdown doesn’t start when you’ve loaded the last box onto the moving van; the lender must complete the foreclosure. After the waiting period, make sure you are fully prepared to apply for a loan. Ask yourself if you have a good debt-to-income ratio. Is your life stable? (For example, there are no high medical bills). Do you have a retirement plan or business in a 401 (k)?
f) First, the good news: Contrintuitively, if you’ve been through foreclosure real estate agents and mortgage brokers have looked at you favorably: You’re a motivated buyer – you bought a house and lost one, and now you’re back again. You will do whatever it takes. And more good news: Foreclosure may be your only credit problem, which means you may be able to clean up the casino a little faster.
g) The government is here to help: Almost all lending institutions – banks, credit unions, and mortgage lenders – will work with government-sponsored programs. There are two: there is the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA), which are only available to veterans of the honorably discharged variety.
h.) Back to the bad news: If the foreclosed loan was backed by the FHA or VA, it is now monitored by CAIVRS, a government database. CAIVRS is almost as bad as the NSA – you are not eligible for another government-funded loan until you have repaid the government.
i.) Look for pre-approval: If you have been foreclosed, the lender must approve your new home loan, so check with the lender first before starting your search. In fact, check with a real estate professional before the lender just to make sure you’ve filled all the boxes.
j.) Size Matters: Be prepared to make a large down payment: 10 to 20%. Also, prepare for a higher interest loan. And don’t look for a McMansion: either Monticello or Mount Vernon or… you have the drift. Find something affordable and less glitzy like an old condo, co-op, or perhaps a mobile home.
k.) Shake the family tree: The creditor may want a co-signer, and a relative may be willing to sign. This, of course, makes them responsible if they will save on house payments. Make sure they are familiar with you, your morale, your finances, your credit score, and your payment history. Make sure they trust you and make sure you don’t ruin their credit. But seriously, only do it as a last resort.
The Bottom Line
Filing for bankruptcy sucks eggs. Huge, rotten, ostrich eggs. But that doesn’t mean you should give up on the American dream. Yes, you will need to rebuild your credit, which takes time and effort. But it’s something you can work on right away to start washing that disgusting taste out of your mouth.