While there may be many appetizingly priced Central Coast foreclosure properties available whether they are pre-foreclosures or bank owned, financing can definitely be tricky to say the least. Only the most dedicated die hard mortgage pros have made it through the past several years of credit crunch and crippling lending guidelines and changes.

Central Coast foreclosures no doubt represent the same issues as many of the previous real estate hot spots which is that the reason most of these homes are being let go by their owners is because they owe more to the lenders than the homes are worth. Obviously these sellers are in no position to pay the difference out of pocket especially when it can mount to hundreds of thousands of dollars. So for those of you unfamiliar – in many areas like Cambria, foreclosure homes are been sold as ‘Short Sales’.

A ‘Short Sale’ occurs when a property is sold and the proceeds fall short of the balance owed to the lender. In this situation a bank or mortgage lender’s workout or loss mitigation department negotiates a discount on the loan balance. The seller/ homeowner sells the property and turns all of the proceeds over to the lender. Banks and lenders base their decision on whether or not to approve a short sale depending on the other options and the costs of foreclosing, holding and re-marketing the property. The dollar amounts banks will approve will vary widely as well depending on the market, the condition of the property and how much of a hardship the seller is suffering. However an example of a Cambria foreclosure property could even be as high as a discount down from $650,000 to $380,000.

When purchasing Central Coast foreclosures as anywhere else, unless you are paying all cash you are still left with the fun of finding financing to take advantage of these opportunities. In the current lending climate it is absolutely more important than ever to get your financing inline before trying to make an offer on a property. We have heard so much about the implosion of so many lending institutions over the last few years and while rates are still attractive, lending criteria continues to tighten. Even though Fannie Mae and Freddie Mac may have eased in some aspects to be able to make more loans the individual banks and mortgage lenders making the loans continue to make standards more stringent than ever in an effort to avoid any risks at all and to avoid being accused of any type of fraud. A recent phone interview with a loan officer at Hitech Lending laid out just how much more lenders are being cautious by now requiring multiple quality control (QC) reviews at every stage of the approval process. And this applies whether the home is not even in distress or has already joined the ranks of other Central Coast REO and has been repossessed by the bank. Making it even more essential to have your financing pre-approved is the circus of getting an appraisal these days. Not only have appraisers been scared into being overly pessimistic but neighboring properties being foreclosed on and being sold at auction prices can drag down the comparables on paper even if they are not a true reflection of market value. No matter whether the property is currently in foreclosure or it is a Central Coast bank owned property or REO, loan officers and mortgage brokers are pretty much all in agreement that FHA is really the only loan program left out there. So while that may be great for those of you buying your first home or relocating, serious investors likely may need to rely on private financing or hard money loans to be able to consistently make deals work.