Whether you are buying a primary residence, a vacation home, or investment property, this may be a good time to purchase a home. Prices have fallen sharply in most areas, and interest rates are low. Still, you may have to deal with some obstacles:
* Short sales. The owner might agree to a bargain price of, say, $150,000 for a house that sold for $200,000 a few years ago. However, if the outstanding mortgage is more than $150,000, you have a “short sale.” Either the homeowner will have to make up the lender’s loss or the lender will have to agree to the sale. Short sales take a while to work out and may finally fall through.
* REO property. After a foreclosure, homes often become real estate owner (REO) by the lender. Most lenders are eager to sell, and prices may be attractive. A house that has been foreclosed and then unoccupied might not be in good condition, though, so you should hire a home inspector for a careful evaluation before making a commitment.
* Financing. Lenders want to see a substantial down payment now–for investment property, as much as 40 percent down might be required. Retirees face a special challenge because lenders want to see income, too. One strategy for retirees is to set up regular IRA withdrawals after paychecks stop coming. Lenders may consider periodic IRA withdrawals to be income, sufficient to justify a mortgage loan.