Financing foreclosures can be a challenge. Financing real estate foreclosures with purchase money mortgages is not a viable option if the borrower or the property does not qualify.
Banks will not finance properties that need major repairs, unless the loan is owner occupied and the borrower qualifies for and FHA 203k rehab purchase loan.
Investors basically have two options when purchasing major rehab foreclosed properties. Pay cash or use hard money loans.
At first it might seem that a purchase money mortgage was the same as any other financing but that’s not entirely true. For instance, in California a homeowner with a purchase money mortgage who is foreclosed cannot be sued by the lender to make up any losses on the loan. However, if the property has been refinanced there’s no longer a purchase money mortgage and so the protection for homeowners against deficiency judgments disappears. This example of purchase money protection does not apply to investors and that the rules in other states are different.
Is the buyer an owner-occupant or an investor? If an investor you will be required to put down more and to pay a somewhat higher rate. When financing foreclosures, the rules and paperwork are simply the same as any mortgage originated.
Cash is king of course, and solves all financing foreclosures problems while loans from hard money lenders helps many investors that can not receive bank loans or have enough cash themselves.