Your team should be comprised of a real estate attorney with experience in foreclosure purchases and sales and a mortgage professional who will walk you through the process while ensuring your placement in the appropriate mortgage program.

When reviewing your financing options, ask yourself the following questions:

• Will this be an investment (rental property or a property to renovate and put back on the market)?
• Will this be my primary home?
• Will this be a second home, i.e. summer home or vacation home?
• How long do I see myself holding on to this property?

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Mortgage Options
These questions are critical because they will determine the best type of financing for your situation. For short-term investments, adjustable rate mortgage (ARM) programs will be your best bet. The advantage to an ARM program is a lower rate that allows you to keep your payments low and enjoy a better cash flow every month. The disadvantage to an ARM is that after a fixed rate period, the rate will adjust. If you aren't yet ready to sell the property, your payments could increase over time.

If you plan on holding on to the property for more than five years, consider a 30-year fixed rate. Fixed rate mortgages are popular because your payment and interest rate do not change over the life of the loan. Thus, homebuyers can lock in the current rate, avoiding the inevitable rate climb. Fixed rates, however, are higher than ARM rates, so the monthly payment is higher.

These are just a few suggestions in a world of other financing options. Some require an interest-only payment for a portion of the loan, while others adjust monthly. Some have up to four different payment options, and some can be paid back over 40 years.

An increasingly popular program is called a Cash Flow Option ARM. Investors like this program because it allows four different monthly payment options, which provides cash flow flexibility. Payment rates can start as low as 1%. The four payment options include:

• minimum payment based on the payment rate
• interest only payment (no principal is paid and the balance of the loan remains the same)
• fully amortized payment (principle and interest payment on a term of 30 or 40 years)
• 15-year fully amortized payment (principal and interest)

Although having fundamental knowledge of the available programs is essential, each program includes several nuances that offer advantages to homebuyers. Every homebuyer's financial situation is different, so it is critical to work with a mortgage broker who will look at your situation and make sure you end up in the program best suited to your needs. With thousands of programs available, it often requires a specialist to match a homebuyer with the optimal mortgage.

Down Payments
Several options exist for down payments. Typically, anywhere from a $5,000 certified check all the way up to 5% of the bid price can be required at the auction if your bid for the home is accepted. This money can be counted toward the down payment. Purchasing the house for your own use can get you low financing, whereas if you are buying the property for an investment, and the house will not be owner-occupied, the down payment is often 20-30% of the purchase price. But these figures can be flexible depending on the final price of the property and your credit history.

When buying a foreclosure property, do your homework! Go to a scheduled auction for a property in which you do not intend to invest and see firsthand what goes on. Pay attention to how many people attend, how the bidding works and how the procedure works after the bidding process ends. Then, when you feel comfortable with the auction process, follow these steps:

1. Speak with a mortgage professional and get pre-approved for a mortgage
2. Identify a particular property.
3. Educate yourself on the area - find out what has sold recently in the area that is similar to the property you have identified (a good mortgage professional should be able to help you with this information).
4. Find out about any liens that are recorded against the property (again, a good mortgage professional can help you or recommend someone to help you obtain the public information).
5. Come up with a range in which you are willing to bid.
6. Get a certified check or bank check made out to you for your down payment.
7. Bid!

There are many great opportunities in the foreclosure market. With research, patience, and a great team of experts in your corner, you can expect to purchase valuable properties at a discounted price. Consider this exciting market today!

Deborah Siegel is president of Westchester Mortgage in Newton, MA (www.westchester-mortgage.com). She can be reached at (617) 965-1236 or debbie@westchester-mortgage.com.

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