If you're looking to save money on purchasing a house, foreclosures are a great way to go. However, there are still very costly mistakes that buyers can make.

1.        Not knowing what Government Programs are available

There are many government assistance programs available for first time buyers, and owner occupants.  These programs can help with both down payment and closing costs.  It gets confusing sometimes as to what program works in a given area.  Your Realtor, and your Lender can both help you select the right program to apply for. 

In the Houston area there are mortgage assistance program sponsored by (HAP)  Houston Assistance Program, (Seth) Southeast Texas Housing, Texas Work Force Programs, (HOYO) Home of your Own, Harris County Housing Assistance, VA, and  about eight others.  There are many programs out there for you to chose from.  An example, would be HUD has a $100 down payment program for people buying HUD foreclosures.

2.        Over Bidding

Over Bidding is a constant mistake made by those people who have not done their homework. Remember when you bid over the asking price for a home the existing appraisal can not be used, and a new appraisal is needed. Beyond an additional cost, this new appraisal can create problems all of its own. It is far better to bid the asking price or slightly less if you are not in a red hot market where properties are going under contract quickly.

3.        Paying for an Appraisal

Paying for an appraisal is not necessary when buying a foreclosure from the entity which holds the foreclosure. For example, if you were to buy a HUD foreclosure, the appraisal that they have already paid for can be requested by the lender and used to finance the home. This is a $400 to $500 savings. By using the existing appraisal you can save time and not waste energy explaining to the new appraiser that the house is a foreclosure and that is why they can not reduce the value based on small cosmetic issues. In short ALWAYS use the FREE appraisal from either HUD or VA.

4.        Not Getting the Most Out of a Home Inspection

If you are buying a foreclosure you always want to make sure you get a home inspection. This will let you know what sort of repairs will be required and if you are getting in over your head. This will also influence any repair escrow. The value of a home inspection can be increased if you meet the inspector at the house. Remember this inspector is working for you, since you pay them you should get what you want. The inspector needs to understand that the property is a foreclosure, and that they can help you by listing out the things that you would like to have fixed once you buy the home. This list can help you increase the escrow amount that HUD has offered for repairs.

5.        Not Maximizing Your Investment

Not understanding how to make money buying a foreclosure is a missed opportunity! Because the house is a foreclosure the Federal Government will allow you to include most planned repairs into the mortgage amount. This leaves your money where it belongs….in your pocket.

So, when you meet with your Home Inspector, what you need to tell them is everything that you wish to have repaired. (It is best to make out a list before he arrives). When that list has been annotated by the Home Inspector, you can bring that list to HUD and show that they have under reported the problems with the home, and that these additional repairs must be included in the loan. This can increase the loan amount slightly but the home will be in the condition that YOU prefer.

Scource: USHud.com