Are Traditional Foreclosures Or HUD Homes A Better Choice For First Time Homebuyers?

The foreclosure crisis, it should surprise no one to hear, has been a national disaster. However, even disasters often also provide opportunities and the wave of foreclosures which has swept across the country and the corresponding housing slump is definitely no exception. There are an unprecedented number of homes showing up in foreclosure listings as well as federally owned HUD homes which are available to prospective buyers at a significantly lower price than a conventional home purchase, even given the state of the still-recovering housing market.

If you’re considering buying your first home and you've only just begun the process of looking around at your options, it’s understandable if you’re wondering whether HUD homes or the properties you may have seen in foreclosure listings are a good deal for prospective buyers like yourself. As it happens, there is no easy answer to this question. There are many foreclosed homes as well as commercial properties which are an excellent value, as well as those which are in poor condition, although the prices on these properties are generally quite reasonable. By the same token, there are HUD-owned homes which are also great deals; but again, the usual rule of caveat emptor applies.

Actually, HUD homes and foreclosures are not mutually exclusive. As it happens, many of the properties offered for sale by the department of Housing and Urban Development are foreclosed properties which are now owned by HUD. These properties, much like bank-owned REO homes, are available at low prices which are especially favorable to first time home buyers; like banks and other traditional mortgage lenders, HUD doesn’t really stand to gain anything by keeping vacant, unsold homes around. The federal government, in this case, is a motivated seller and that can work to your advantage as a home buyer.

Qualifying to buy HUD homes is relatively easy, with no specialized criteria for buyers. If you can qualify for a traditional mortgage, you can certainly purchase a home from HUD; and you may even qualify for a Federal Housing Administration (FHA) subsidized mortgage in some cases. However, given the enormous inventory of non-HUD foreclosed properties on the market, you may find it easier to find a home which appeals to you by looking at foreclosure listings online.

RealtyStore.com is one website which has an especially large database of foreclosure listings, with foreclosed residential and commercial properties available in virtually every metropolitan area in the country. Along with foreclosed homes, the site also offers a large variety of for sale by owner properties (FSBO), owner financed home sales, rent to own homes and other low cost options which make home ownership increasingly open to first time homebuyers.

Ultimately, the choice of whether to look at HUD homes or to find other foreclosed properties for sale is up to you. There are excellent deals to be had in both, so the choice will more than likely come down to the same criteria that would apply if you were taking the traditional path to home ownership: location, location, location, price and of course, your own personal tastes. There’s never been a better time to be in the market for a home of your own, however, so now is most certainly the time to get started shopping around, whether online or by looking at local advertisements and begin looking for a foreclosed property or a HUD home which meets your requirements and makes you feel like you’ve come home at last.

Furniture Rent-to-Own Scams Give Lease Options a Bad Rap

Rent-to-own scams are now running rampant in the furniture market. Those who are unable to purchase the furniture they need outright or on credit are convinced to sign rental agreements for their furniture. Some see it as an opportunity, but most feel it is simply their only option to get the furniture they need to live comfortably. By the end of the lease purchase agreement, they end up paying double or triple what they would have paid for the same furniture with a straight purchase.

Lease option homes are often considered rent-to-own frauds as well, but their agreements are actually very different. Renters are given the option to make rent payments over time just as with furniture rent-to-own agreements, but in the end, these renters are able to purchase the home with a down payment already saved up. Every monthly payment they make has a built-in deposit to their eventual down payment. It is a savings plan and a rental agreement wrapped in one convenient package.

While there are many rent-to-own complaints by victims of rent-to-own scams in the furniture industry, not as many people end up filing a rent-to-own complaint after signing into a lease option deal for a home. They typically see the opportunity in front of them and recognize the risks before entering the deal. The option is not something they are forced into doing, since they could very well find another home to rent without the lease option on the line.

So, what are the potential downfalls to signing into a lease option agreement? The biggest risk is losing your down payment money if you decide not to purchase the home when your lease term is up. These agreements are very specific, and you have to know your terms and protect yourself along the way. Specifically, look for the following clauses:

1. If you miss a monthly payment or are late on a payment, you could forfeit the portion of your payment typically going to save for your down payment. The agreement could eventually void if you miss or are late too many times.

2. If you are unable or unwilling to buy the house within a given time frame at the end of your lease agreement, you lose all money saved up for your down payment. You only get that money if you buy the specific house you are renting at the end of the lease.

Keep these risks in mind as you consider a lease option home, but understand that these deals are not rent-to-own scams!