For individuals who are in good financial standing, now is looking like a great time to get involved in real estate investing.  The market is prime for buyers with good credit and cash to invest, but there are some types of investments that first time investors should leave for the pros, like bulk REO buying.  There are, however, opportunities that scream for first time investors and FHA foreclosures are one of the best places for novices to start.

The Federal Housing Administration or FHA is a government agency that insures loans to help many people buy or renovate their properties. It is important to understand that the government does not make FHA loans.  Banks make them, but the U.S. federal government guarantees the loans. More often than not, the FHA is a lender of last resort, making loans that traditional banks would not consider generally to buyers who cannot get traditional financing.  What this means is that most FHA loans are at a high risk for defaults and when the borrower does default, the government is on the hook for the mortgage.  The result is that there are a lot of opportunities when it comes to buying FHA foreclosures. 

The FHA relies largely on an auction system to get rid of excess government properties.  There are agents who are privy to FHA foreclosure auction information.  There are also many “fee” oriented services that provide lists of FHA and government foreclosures.  I would advise contacting an experienced real estate agent, especially if you are a first time investor. 

FHA foreclosures have been a popular choice among house flippers for years.  Investors of this type can usually purchase the property at incredible savings, make repairs and turn the homes around for profit.  Investors also qualify for very low down payment options, which can make getting started in real estate investment all the more appealing. 

FHA foreclosure investment property can also be purchased with FHA foreclosure loans or a federal administration mortgage.  When a FHA foreclosure is purchased, the Federal Government insures the bank that the FHA home loan will be repaid just as they did with the original loan to the homebuyer who defaulted.  Bear in mind though that the government protects itself by charging a Mortgage Insurance Premium of about 2.25 percent of the mortgage.