Using the HECM to Buy a Foreclosure Property

A recent reverse mortgage blog discussed using proceeds from a Home Equity Conversion Mortgage (HECM) to purchase another residence. Before going this route, it’s important to understand the foreclosure process.

Using a Reverse Loan

First, decide if this is really the way you want to go when shopping for a home. Foreclosures can be risky if you don’t have a lot of knowledge about the process. When you borrow with a reverse mortgage, you are converting current home equity to cash. So it’s important to put together a solid plan for making reverse loan proceeds stretch as far as possible.

Foreclosure Process

When a homeowner defaults on a mortgage loan the lender files a Notice of Default that starts the process of recovering unpaid money or taking back the property. Once that occurs the following things could happen:

1. The homeowner can either pay what’s owed on the loan.

2. The homeowner can sell the home during the pre-foreclosure period.

3. The house could be auctioned off at the end of the pre-foreclosure period.

4. The lender could take ownership of the property through foreclosure with the intent to resell it.

RealtyTrac has an informative guide that explains the whole foreclosure process if you want to learn more. Even if you think you have a good understanding of foreclosures, avoid ;purchasing a home without the help of a knowledgeable attorney.

Shop Around for Deals

Think about why you want to consider foreclosures. If you just want to find a good deal to make your reverse mortgage proceeds stretch farther, you probably don’t have to look too far. Home values are still down across the U.S., so you should be able to find something affordable and in good condition that isn’t tied up in the foreclosure process.

This entry was posted on Wednesday, April 21st, 2010 at 2:00 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.