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FHA Loans for House Under a Sheriff Sale

by Brenda C.
(Hillsboro OH )

So, I would like to try to purchase a single family home that has come up under a sheriffs sale.

It is in a rural community near my elderly mother and it has been appraised at $45,000. I must have 10% down day of auction which I have.

Other institutions are requiring 20% down and $3,000 for closing costs. Can you help?

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How To Buy a House From a Sheriffs Sale
by: Jeff Ragan

Hello Brenda,

Thank you for visiting my website and asking your questions.

As you are well aware of, the laws vary from state to state on how a person can purchase a home at the sheriffs sale. I do not offer any legal advice and only wish to convey to you some thoughts on how you might proceed.

In most cases, a house sold at a sheriffs sale require a cash out after the auction. Often times you have a very short window of time to complete the transaction.

With this being the case, you either need cash or at the very least be pre-approved for an FHA loan or conventional loan.

Perhaps you have already done this since you mentioned 20% down payment and $3,000 closing costs.

The state or county laws may not leave you with enough time to get your financing in order.

The problem of trying to use an FHA loan for the purchase, which would of course lower your down payment requirement is the condition of the house.

Most houses going through a sheriffs sale are not likely to pass an FHA inspection so your loan would get denied anyway. No seller in this case is willing to bring the house up to FHA standards.

This is a very difficult situation if you plan on using financing. Lenders are a little shy about houses in foreclosure. Often times it takes a very long time to close them.

The best advice I can offer is to find a way to pay cash for the home and offer a land contract with interest to the person(s) who lend you the money.

This is a small amount of money, although I realize it could be a lot of money to you.

But in the situation you describe, I cannot see any other way to secure the property.

Perhaps after you buy it and fix it up you could do a cash out refinance to pay back your investors.

I know this is not what you wanted to hear, but I cannot think of another solution off the top of my head.

I wish you the best!



by: Teress

I purchased a sheriff sale home which I have had for close to a year. I received an estimate of 20k to rehab the house from a general contractor. I actually received 3 quotes tallying to be the same. I have 10k. Is there a program which offers loans or grants that I can apply to for the other 10k that I need?

Rehab A House Bought From the Sheriff Sale
by: Jeffrey

Hello Teress,

Thank you for asking your question here on my website.

Congratulations on the successful purchase of a home from a Sheriff sale.

So now you want to do some rehab work to it to improve the home.

You mentioned you have estimates for around 20k to get the work done and you have about 10k of your own money. So you're looking for another 10k.

I see three options, I will list them in the order of least expensive for you to get the work done.

1) Look into a HELOC loan. This is a home equity line of credit. As long as you have some good equity in the home equal to or greater than the 10k you need, this could be an option.

2) Another option is a "Title I Home and Property Improvement Loans". These are hard to find but HUD provides a list of lenders who do them. Click here and to Visit for more information.

3) The most expensive way (which I do not recommend) is to do a cash out refinance. If you have the ability to take out the cash needed to do the construction, you could finance the whole 20k and leave your money in the bank.

Anyway, those are some options for you to consider. I really think the HELOC is the best one for you.



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