First Time Home Buyers Turning to Foreclosures   by Cristina Sivak

First time home-buyers, now more than ever, are seeing foreclosures as a perfect opportunity to purchase their first home. The low cost of many foreclosures is opening the door of owning a home for low and mid income families, providing them with the option to invest rather than rent for similar costs. The government has created several programs tailored to attract first time home-buyers to purchase foreclosed homes, and lessen the burden that is left on banks and neighborhoods.

Foreclosure homes are properties where the lender is pursuing legal measures to obtain back possession of a property because the owner of the property has fallen behind on payments of the loan. There are basically three stages of the foreclosure process where first time home buyers can purchase properties – buying pre-foreclosure (including short sales), buying at the auction, and buying post-auction as a real estate owned (REO) property.

On September 16, 2010, national statistics were released for August 2010. This report shows foreclosure filings – default notices, scheduled auctions and bank repossessions – were reported on 338,836 properties in August, a 4 percent increase from the previous month but a 5 percent decrease from August 2009. One in every 381 U.S. housing units received a foreclosure filing during the month. According to real estate market trends across the United States, the highest rates of foreclosures are right here in Chicago, other parts of Illinois, California, and Texas. Foreclosures are still on the rise, topping over 3% each month.

As the rate of mortgage foreclosures increases, the banks expectations of potential buyers are becoming more distinct and specific in order to sell foreclosures as quickly and easily as possible. As a result, many homes are being sold drastically below their market value; some are selling at as little as 30% of their market worth.

Besides being affordable, many first time home buyers are drawn to foreclosures because of the offering of the Nations Department of Housing and Urban Development assistance programs and incentives. HOME is the largest Federal block grant to State and local governments designed exclusively to create affordable housing for low-income households. HOME stands for Home investment partnership program. HOME is authorized under Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended. The HOME program allows low to mid income family groups financial government assistance to aid in purchasing foreclosed properties at drastically reduced prices.

Another first time home buyer initiative is the Illinois American Dream Down payment Initiative (ADDI). The following units of government are participating in this program designed to help new home-buyers overcome the down payment hurdle: Chicago, Cook County, DuPage County, Lake County, Madison County, McHenry County, Peoria, Rockford, St. Clair County, Will County, and Urbana.

On the whole while homeowners are being overly cautious about their housing loans, foreclosures have resulted in a favorable opportunity for fist time home-buyers who can now purchase a property, which was otherwise out of their reach last year.

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