Buy a Foreclosed Property
Considering purchasing a bank-owned, foreclosed, or REO property?
Let us help you understand the options and considerations so you can make informed homebuying decisions.
Here are the answers to some commonly asked questions about purchasing foreclosure properties.
What are foreclosed properties?
How quickly can I take ownership?
How can purchasing a foreclosed property help a community?
Are bank owned properties sold at a discount?
Do I need cash to buy a bank-managed home?
Are REO homes in poor condition?
Your reasons for purchasing the property dictate many of your considerations. You may benefit from information and insight from our Learning & Planning Centers when finding and financing your home:
- Are you looking for a move-in ready home or are you willing to make repairs? If you are considering a home that needs repairs or remodeling, Wells Fargo has options that let you combine your home improvement costs with your mortgage.
- Our Purchase & Renovate SM loan option allows you to borrow based on the future, improved value of the home instead of the current value. Renovations can begin immediately after closing (restrictions apply). And the renovation costs are spread throughout the entire loan term.Footnote number 55
- Before you buy a foreclosed property, you may want to consult with a reputable home inspector about the kind of repairs and costs to expect for the type of homes you have in mind.
- If you are purchasing a Wells Fargo property or a home managed by our REO division, Premiere Asset Services (PAS), you will be required to provide one of the following with your offer:Footnote number 11
- A prequalification letter from Wells Fargo.
- A credit approval letter from the Neighborhood Assistance Corporation of America (NACA).
- A credit-decisioned preapproval letter from another qualified lender.
- If you are a cash buyer, you don't need a prequalification letter, but you may be required to provide proof of funds when you make your offer.
- If you are keeping your current home, you may be able to use the equity in your home to buy a bank-owned home:
- With sufficient equity, you may be able to purchase the property and avoid an additional first mortgage.
- You avoid paying private mortgage insurance by making a down payment of 20% or contribute a larger down payment to lower your monthly mortgage payment.
- You can select the home equity closing cost option that meets your needs.
- Typically, the interest on home-equity financing can be tax deductible. (Consult your tax advisor regarding the deductibility of interest.)
Your monthly mortgage payment is typically made up of four parts:
- Principal is the amount of money you borrowed.
- Interest is the cost of borrowing the money.
- Taxes are the property taxes charged by your local government. Typically we collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
- Insurance refers to homeowners or hazard insurance that provides protection against loss from property damage due to wind, fire or other risks. Like taxes, insurance costs are typically collected and paid from an escrow account.
Depending upon your property location, property type and loan amount, you may incur other monthly or annual expenses such as mortgage insurance, flood insurance, and homeowners association fees.
Learn more about establishing and improving your credit
- Do you pay your bills, loans, credit cards and other debts on time?
- We examine your payment habits before deciding to loan you money.
- Your credit history and credit score are also examined prior to deciding to loan you money.
- It's a good idea to check your credit history and correct any problems before applying.
- Do you have enough funds for a down payment and closing costs?
- You may use funds from a savings account, certificate of deposit (CD), investments, and retirement fund.
- In some cases, you may be able to use a gift funds toward closing costs and all or part of the down payment.
- In many cases you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax and insurance payments.
- What is the market value of the property you want to purchase?
- We will order a property appraisal to make sure your property's value meets our underwriting requirements.
We approve applications where we believe the borrower has the ability to repay the loan or line of credit according to its terms. We use two ratio-based guidelines to evaluate your ability to repay.Footnote number 22
Even if you fall within the 28%/36% rules of thumb, make certain that you feel comfortable making your monthly mortgage, insurance and tax payments and the payments on all your other monthly obligations. Homes have other costs—such as utilities, maintenance and repairs—that may not exist if you rent.
Your down payment may come from two sources — equity in your current home, and any personal savings you have built up in bank or investment accounts. You can also prepare by:
Deciding how to begin
Creating a financial plan
Estimating what you can spend
Setting a time frame
- A free mortgage prequalification lets you estimate how much you can borrow, based on basic financial data you provide.Footnote number 44
- A preapproval letter tells a REALTOR and seller that you've been preapproved for a specific amount based on a preliminary review of your credit information.Footnote number 33
Remember: Neither a preapproval nor a prequalification obligates you to borrow from Wells Fargo.
How can I benefit from a preapproval?
- You can identify and address possible qualification problems early in the homebuying process.
- Obtaining a PriorityBuyer® preapproval tells real estate agents and home sellers that you have been preapproved for a specific mortgage amount.Footnote number 33 Real estate agents and sellers increasingly rely on preapproval to identify serious offers.
- Provides an advantage over buyers who are not preapproved.
- Adds to your negotiating strength when you are ready to make an offer on a home.
- Lets you shop confidently because you know how much you may be able to borrow.
- May allow for a faster closing, since the first round of credit decisioning is already completed.
First-time homebuyers can benefit from preapproval in the following ways:
- Without a record of previous mortgage payments, a preapproval can help you feel much more confident pursuing your first home purchase.
- A preapproval shows the seller that a lender has already run the numbers and is willing to proceed with the mortgage.
How does the process work?
- If you're still in the early stages of house-hunting and want to know roughly about how much home you can buy, request a free mortgage prequalification.Footnote number 44
- If you're ready to move forward, line up your financing ahead of time with a PriorityBuyer® preapproval, which requires a credit check and a completed mortgage application.Footnote number 33
- Work with us online, over the phone, or in person with your local consultant.
View loan options now.
Making an offer
When you make the offer, consider these tips:
Put your offer in writing
Have your preapproval for maximum leverage
Submit a deposit
Finalize your purchase contract
- Learn about your loan options. We'll help you find a mortgage that meets you needs from our wide array of mortgage products.
- Get ready to apply. Find out what information you'll need to provide when you apply for a mortgage.
- After your application is submitted. Learn how you can track your application status online.
Banking Closing Costs
Depending on your state, you may be responsible for mortgage taxes, attorney fees and other third-party fees.
Premiere Asset Services
PAS is the trade name Wells Fargo does business under to manage REO's on behalf of other large banks and financial institutions.
Total the amount of your savings and other down payment sources
- savings and money market accounts,
- stocks and bonds
- certificates of deposit
Closing cost options
Have us pay your closing costs
- You pay a higher interest rate to cover all required third party costs
- This option is not available for financing greater than $500,000
- You pay a lower interest rate
- Pay with your loan proceeds, line of credit, or a check
For details, please contact us.