Can you get a mortgage allowing you to bid on a foreclosed property?
Our realtor advises that only buyers with cash in hand can buy foreclosed properties at auction. There is a technical challenge buying if you need a mortgage as you have to be in contract to be able to get the mortgage approved. Is this true or is there a valid way you can get a mortgage and bid on a foreclosed property at auction?
You can get pre-approved for a loan, but you will need to know the price for the house (which you can only guess at before the auction), and you WILL need a certain % of the price in cash (usually) on hand at the auction to secure your bid. Check with the auctioneer, or the newspaper listing/foreclosure notice for that detail, along with how long you will have to present the remainder of the money after the auction.
You need to establish a banking relationship in the commercial loan department. Stay away from residential lenders as they are not involved in investment deals. Explain what your plan is (to buy foreclosures) and arrange a line of credit subject to your winning bid that converts to a first lien mortgage. Most foreclosures require 10-15% at sale and closing in 30 days. You will need collateral and good credit. Start small and prove yourself to the lender even if it is only really small cheap houses. Make the lender your best friend regardless of his decision as you can always go back.