Physical Address

304 North Cardinal St.
Dorchester Center, MA 02124

Can I Mortgage A Foreclosure?

There are different ways to acquire a home and sometimes an opportunity might present itself in the form of a foreclosure.

So, can you mortgage a foreclosure? You can mortgage a foreclosure. Buyers may finance foreclosed properties with the same type of financing as a typical purchase. As long as you have good credit, you should be able to get a mortgage for a foreclosed property.

Mortgaging foreclosures is not the most appealing way of getting a house but a buyer can actually get a gem of a home at a reliable price.

Some people use this method to acquire their actual homes while others use it to flip them in the future. Of course, there might be a few hurdles along the way but nothing that cannot be handled. 

Mortgaging a Foreclosure

Foreclosures exist mainly because the former buyers become unable to make the payments. As a result, when you want to purchase a foreclosure it will most likely be in the condition that the former owners left it. The bank auctions it as is and the new buyer can fix the damages and improve on the property. 

Mortgaging a foreclosure is not automatic and not all foreclosures can be mortgaged. There are some factors that come into play for a buyer to be allowed to mortgage a house.

The Intention of the Buyer

Individuals have different intentions when mortgaging a foreclosure. Some will do it because they want to make the property their primary residence, but other buyers will purchase it as an investment. Flipping houses can be quite profitable and many people target foreclosures because they are normally cheaper. 

It is easier to mortgage a foreclosure if you intend to make it their primary residence rather than flipping it. Some mortgages like FHA loans will require you to live on the property as a primary residence. Lenders will prefer it because they understand that when it is your primary dwelling, a buyer is likely to take good care of it, meaning it will retain value for the long term. 

The physical condition of the property

A house in poor condition is not likely to be approved for a mortgage and if it is the maintenance costs will fall on the buyer. Banks and lenders tend to accept habitable houses as collateral for a mortgage. As a result, when an individual applies for a mortgage, the bank will request an inspection of the premises to ensure the house is up to occupancy and building codes. 

If a house does not have many issues, getting a mortgage on it is not likely to be a challenge. However, if there are issues such as; water or fire damage, vandalism, pests, or other livability issues, the bank will be reluctant in mortgaging the property. 

The Owner’s Credit 

Your credit matters when it comes to securing a mortgage on a foreclosure. The good news is lenders will finance people with good as well as bad credit, depending on them. The difference is that individuals with bad credit scores are likely to be handed higher interest rates than they would have if they had good credit scores. 

The lender will also allow individuals with lower credit to acquire a mortgage if the property is in marketable condition. Thus, if the owner defaults, they will recover the loan amount by auctioning the property. 

Pros and Cons of Purchasing Foreclosures 

Mortgaging a foreclosure can be a good deal for individuals but at the same time, there are some cons involved.

Let’s start with the Pros

  • Lower pricing. Foreclosures will almost always cost a bit cheaper than other homes in the same area. 
  • Fewer title concerns. Buying a foreclosure means the title of the house is cleared by the bank which is easier than purchasing from homeowners. 
  • Standard loan options. Unless it’s a cash-only auction, there are various loans you can use to purchase a foreclosure. 

There are risks when trying to mortgage a foreclosure and buyers should pay close attention to them. Here are some of the major ones.

Expect more Maintenance issues/Costs

There is no incentive to take care of a home if you realize you might lose it to foreclosure. So, if things break or malfunction, there’s a good chance the previous owner will not bother to fix them. For the next buyer, this is a disadvantage since they will have to spend their own money to do it. 


Losing a home is frustrating and some people will take said frustrations out on the house before they have to vacate. The new owner will have to bear the responsibility of fixing it back up thus incurring more costs.

Period of redemption. 

Foreclosures are not always a sure thing. Just because a property is advertised as “in foreclosure” does not mean it will be sold. Different states offer owners a period of redemption within which they can try to catch up on their payments.

Risk of Squatters. 

When a house is legally foreclosed, it might take months or even years for the property to be sold. So naturally, some people might decide to live in them during that time (squatters). The challenge here is that there are squatter’s rightsthat dictate that you need to evict the squatters legally. The eviction process can take months and cost a person money in terms of attorney fees. 

As-is selling

The bank is also often not interested in fixing the houses before reselling them and will jump at the opportunity to sell them as is. As the buyer, you will have to fund the repairs and other maintenance costs. The good news here is that the house will be cheaper since the bank will aim to quickly sell to recover their money as soon as they can. 

Final Thoughts 

Mortgaging a foreclosure is a major decision and it is not for everyone. In a lot of cases, it is a risk worth taking and can you can find a good house. However, it’s always important to watch out for the redemption periods. Also, while you are getting a “good deal” make sure you have some extra funds for repairs. Furthermore, inquire whether the bank can help with some of the repairs.