U.S. foreclosures down?

U.S. foreclosures are becoming more scarce.
September's foreclosure filings were down 7% as compared the month prior, and down 16% from September 2011.
Several states dominate the foreclosure landscape.
For today's home buyers looking for a bargain, these five states may prove your best opportunity..

Foreclosures Return To 2007 / Pre-Recession Levels

In September 2012, there were just 180,427 U.S. foreclosure filings, where "foreclosure filing" is one of the following three foreclosure-related events : (1) The issuance of a default notice on a home; (2) A scheduled home auction by a bank; or, (3) A bank repossession of a home.
There were just 180,427 foreclosure filings last month -- the lowest total since July 2007. However, not all foreclosure filings result in "homes for sale". Some are remedied between the bank and the borrower, and some are sold at auction.
Other times, banks will buy a home back at auction, then list it for sale via the local MLS or some other means. This is called a bank repossession, or bank repo, and it's the inventory today's home buyers and real estate investors watch most closely.
It's with bank-owned real estate that the "great deals" are found, with homes selling at discounts of up to 20 percent of comparable market price. Those deals are increasingly concentrated in just a few states nationwide.
In September, nearly 50% of U.S. bank repossessions occurred in just 5 states -- California, Florida, Michigan, Illinois and Arizona. The next five states -- Georgia, Ohio, Texas, Colorado and Tennessee -- accounted for just 20% of bank repossessions, by comparison.
Like all else in real estate, it seems, foreclosures are a local phenomenon.

Buy Foreclosed Properties With Little Or No Money Down

Homes in foreclosure show obvious allure to first-time home buyers and experienced ones alike. Foreclosures and other distressed properties are typically sold at deep discounts as compared to comparable, non-distressed homes and that can make material impact on your household budget.
Assuming a 20% discount on a $400,000 purchase price and a 3.5 percent downpayment via the FHA's mortgage program, look at how the monthly mortgage payment for a foreclosed home compares to the payment for a non-foreclosed one.

• Foreclosed Home : $1,344 payment for a $320,000 home
• Non-Foreclosed Home : $1,680 payment for a $400,000 home

That's 20 percent off the house, and 20 percent off the payment, too -- a huge difference to your household budget.
However, when buying foreclosure, it's important that you look past the home's list price. Like everything in life, getting the lowest price doesn't always mean you're getting the best deal. For example, foreclosed homes are often sold "as-is" which means that they may come with defects and damage and, in some cases, may be uninhabitable.
Homes in disrepair typically can't get financed. For those that can, however, there are various low- and no-downpayment options available including the aforementioned FHA's 3.5% downpayment mortgage; as well as the 100% VA loan program for military borrowers, and the 100% USDA loan program for those within thinly-populated census tracts.

Mortgage Rates For Foreclosure Purchases

For buyers of foreclosures -- first-timer, move-up buyer, or an investor with more than 4 properties financed -- mortgage rates remain low. Since the start of 2012, rates have trolled south of 4 percent and are expected to stay that way through the New Year.
Low mortgage rates allow for high home affordability. To see how today's rates fit your household, get started with a rate quote.