How to Finance a Foreclosed Home

Foreclosed homes represent a great investment for those willing to attend foreclosure auctions and buy property on the cheap. Even though a home is foreclosed, it may still be expensive enough to require a financing arrangement; with just a few steps, you can qualify for financing and secure your foreclosure purchase.

Become pre-qualified or pre-approved for a bank loan. Start by visiting your local financial institution and asking for pre-approval on a real estate loan. By gaining pre-approval, you demonstrate to the foreclosure sales specialist that you are capable of producing the required funds and serious about completing the purchase.

Attend a foreclosure auction or locate a bank-held property. In most states, foreclosure properties are sold at local auctions, though some jurisdictions may allow banks to sell the property directly without going through an auctioneer. Identify the foreclosed home you wish to purchase, then bid (up to the maximum amount you are willing to pay) at auction or make an offer to the bank holding the property.

Wait for your offer to be accepted. Depending on the bank, your offer on the foreclosed home may be accepted right away or it may take several months to receive a decision. If you are bidding at auction, of course, you will know the outcome of your offer right away. In either case, the selling venue will provide the pertinent payment information you will need when closing your home loan.

Close the loan with your bank. When your bid or offer has been accepted, return to your bank to close the loan for which you pre-qualified or became pre-approved in Step One above. Provide the bank with the applicable payment information received in Step Three above, as the bank will forward funds to the seller when the loan closes.

Complete the transaction. When the loan is fully approved, the bank will set up a closing with a title company convenient to both you and the bank. Attend the closing and sign the paperwork as instructed by the title agent; when all paperwork has been completed, you have successfully financed a foreclosed home.


  • If you have considerable cash or home equity available, consider using these financial resources to acquire the foreclosed home rather than entering into a new loan.


  • Remember that foreclosed homes may be risky investments; pay careful attention to the condition of the property before bidding at auction or making an offer on the home.