Pre-foreclosure (owner still holds title, property has equity): standard conventional or FHA financing if: the title is clear (or can be cleared) of all liens, the property is in habitable condition, and the purchase price supports the appraisal.

FHA: 3.5% down with 580+ credit score; HUD minimum property standards must be met.
Conventional: standard qualifying with no special foreclosure-related restrictions.

Short sale (owner underwater, bank approval required): standard financing also works here — but the lender's approval timeline (60-120+ days) makes rate-lock management challenging. Lock a float-down mortgage or build extension language into the rate lock. Financing approval arrives before bank approval in most short sales; the deal dies on bank timing, not buyer financing.

Courthouse-step auction requires funds that can close within 24-48 hours (or up to 30 days in judicial states). Two options:

Cash: the cleanest; no rate risk, no lender timeline. Requires substantial liquid reserves for both the purchase and the renovation budget.

Hard money loan: a short-term, asset-based loan from a private lender or hard money company, typically:
• Interest rate: 9-15% annually
• Points: 1-3 at origination
• LTV: 65-75% of after-repair value (ARV)
• Term: 6-18 months
• Approval: often in 24-48 hours; based on property value, not borrower credit

Hard money is expensive but bridges the gap between acquisition and either renovation-resale or refinance into a conventional loan. The investor math: buy at auction with hard money, renovate, refinance (BRRRR strategy) or sell. The cost of the hard money (roughly 2-3% of purchase per quarter) must be built into the deal economics from the start.

Conventional and standard FHA on habitable REOs: works normally. Banks accept these financing types on REO properties. Inspection periods are shorter (5-10 days) and the bank addendum governs — but the mortgage itself is standard.

FHA 203(k) on distressed REOs: the single most powerful financing tool for owner-occupant foreclosure buyers:
• Finances purchase + renovation in one mortgage at 3.5% down
• Based on after-improved value — not current distressed condition
• Allows the uninhabitable property that fails standard FHA to become a financed purchase
• The discount for condition + renovation financing = entry equity

Fannie Mae HomePath: Fannie Mae REO properties (listed on homepath.fanniemae.com) qualify for the HomePath Mortgage: 3% down for owner-occupants (5% for investors), no appraisal required (no appraisal = no appraisal gap), and no mortgage insurance. For an owner-occupant buying a Fannie Mae REO, HomePath can beat both conventional and FHA on total cost.