Mini Mortgages for Properties on Lists of Bank Foreclosures

Veteran and novice homebuyers know that they can have homes at big discounts from lists of bank foreclosures. But some homeowners in Detroit, Michigan still could not afford to buy their dream houses because of the difficulty of stretching their small mortgages.

With mini-mortgages, homebuyers who have $30,000 and less are given an opportunity to fulfill their dreams of owning a home. These mini-mortgages, ranging from $30,000 and less, are offered only by selected lenders. And they are ideal for homebuyers who are seeking for great property bargains on lists of bank foreclosures.

Bank of America is offering a mortgage package in which a Detroit resident’s savings with the American Dream Down Payment Initiative (ADDI) grant is combined with the bank’s Welcome Home program which targets borrowers in low-income areas.

Small mortgages are becoming popular in Michigan as the expanding lists of bank foreclosures pushed down home prices to as low as $10,000. However, most of these cheap houses are being sold to cash buyers.

Usually, banks set a minimum mortgage of $50,000 or $40,000. But there is a possibility that homebuyers can find a mortgage for a $20,000 distressed property. Some lending institutions are experimenting with small mortgages, often with higher interest rate.

Aside from mini-mortgages, there are other available sources of cheap loans. Industry experts suggest that homebuyers should try approaching the bank that owns the properties they want to buy for a loan. With so many properties on lists of bank foreclosures, some banks would willingly waive rules on minimum mortgages on their foreclosures.

Some banks would even consider borrowers who do not have perfect credit score. Meanwhile, some credit unions offer customized mortgages for their members, including loans with lower minimum if their communities have low-priced properties.

Communication Arts Credit Union loan manager Jim Millen said that the credit union is offering mini-mortgages but so far, no member has applied yet. He said that the credit union is willing to provide as low as $10,000, adding that qualification standards, fees and interest rates for small and large mortgages are the same.

But the payoff time for small mortgages will only be at the most 12 years, unlike the standard 30 years for large loans, Millen said.
Currently, mortgage-only firms are more inclined to provide mini mortgages to help homebuyers purchase discounted homes on lists of bank foreclosures.

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