Auction Homes

OnTheWay · Joined: 15 Jul 2007 Posts: 6

Again, I have to say what a wonderful resource this forum is. I have come accross an auction for lender owned properties in my area. There are some terms and conditions that are a little scary. The rules are 5% in cash day of auction, escrow must close in 21 days and 5% buyer premium plus closing costs at the end of escrow. We are first time buyers looking to go now higher than 200k. They recommend using their lender otherwise there is no guarantee that a 3rd party lender could close within 21 days. How do HUD and CalHFA lenders view auction homes? Is there any lender that will guarantee a loan amount prior to an auction as well as a time frame? Is there any way to predict what closing costs will be? Also, if we were to take an interest only loan could we still pay the full mortgage payment every month instead of just interest? Thank you in advance for any responses.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Quote: They recommend using their lender otherwise there is no guarantee that a 3rd party lender could close within 21 days.
I don't know about other lenders, but we have a close on-time guarantee that fits *most* loan scenarios. (Renovation is not one of them.) That being said, most often the reason that a loan may not close in 21 days would be something related to borrower inability to provide documentation, or appraisal issues, or title issues, etc. You'd want to make sure you had a commitment letter ready from an underwriter and cleared the conditions requested prior to submitting your offer. This way, your only concern is with the property.
Quote: How do HUD and CalHFA lenders view auction homes?

I'm not 100% sure on this, however I've never had any issues with loans on auctioned houses. It's the same as if you had put down 5% earnest money on any other home, you just need to make sure that you meet the specific requirements of the loan you are applying for (Utilities turned on, house meets specific program requirements, etc.)
Quote: Is there any lender that will guarantee a loan amount prior to an auction as well as a time frame?

That pretty much sticks with what I had mentioned earlier. Having a close on-time guarantee with a clear commitment letter would be the way to go. Wells Fargo has it, I don't know about other lenders (Obviously I only work with Wells :) )
Quote: Is there any way to predict what closing costs will be?

Your lender should be able to provide a *fairly* accurate good faith estimate. What I usually do when I'm dealing with a loan scenario out of an area that I am familiar with, is to call and get a cost estimate from a local title company so that we can provide an accurate estimate of costs including local taxes etc.

Quote: Also, if we were to take an interest only loan could we still pay the full mortgage payment every month instead of just interest?

Of course!!!! Frequently this is one of the best features of the interest only loan. If you look at a loan after a few years and compare it amortized vs interest only, but with the same payment, you'd be shocked at the difference!

Quote: Thank you in advance for any responses.
You are quite welcome :) Gives me something to do while waiting for underwriting to get back to me (I just know I'm going to get phone calls on 7 loans in a 5 minute spread...)

chow · Posted: Wed Jul 25, 2007 12:35 am Post subject:

You are quite welcome Gives me something to do while waiting for underwriting to get back to me (I just know I'm going to get phone calls on 7 loans in a 5 minute spread...)

Yes, and all 1003's are gold..... :lol: :wink:

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

No, I meant loans in process :P

power broker · Joined: 12 Sep 2007 Posts: 15

What area do you live in? I want to know if you have a lead on this kind of auction dealing is Los Angeles Ca.. Also your loan scenario is one you might want to discuss with their lender.

Jenie0109 · Joined: 27 Jan 2009 Posts: 307 Location: chicago IL

thanks for all the help.