In many markets, it’s become hard to find foreclosures worth buying. Competition among investors and a steady decline in defaults have resulted in fewer foreclosures available for purchase. That’s bad news if you’re looking to buy a fixer-upper to call home.

While the private sector’s supply of foreclosures may be shrinking in many places, the government and quasi-government agencies that underwrite home loans have plentiful supplies.

In addition, government foreclosure sales programs discriminate against investors who intend to purchase real estate to flip or rent out. These programs make it difficult—if not impossible—for said investors to compete with buyers who intend to buy a home and live in it themselves. For many buyers, this will mean less competition.

Federal Housing Administration (FHA) 

You might find the best bargains among FHA foreclosures, which are foreclosed homes once owned by FHA borrowers who defaulted on their mortgages. These are generally starter homes that may need repairs, and the FHA has a special loan program to help handy buyers purchase these homes.

While most lenders have seen their defaults and delinquencies decline, the FHA has about twice as many seriously delinquent loans today as it did in 2009.

The Department of Housing and Urban Development (HUD) sells FHA foreclosures through a bidding process that is closed to investors for the first 30 days. Listings can be viewed at, and buyers need to work with brokers who are registered to bid with HUD.

If you find a home that needs fixing up, you can apply for an FHA 203(k) rehabilitation loan at a long-term fixed (or adjustable) rate. The loan will finance both the acquisition and the rehabilitation of the property.

HUD also has a commendable Good Neighbor Next Door program, which is designed to encourage the revitalization of communities by providing opportunities for law enforcement officers, firefighters, emergency medical technicians, and teachers to purchase homes. In return for a promise to live in the property for three years as a sole residence, HUD provides qualified buyers a substantial incentive in the form of a 50 percent discount off the list price of eligible properties.

Fannie Mae

Fannie Mae’s foreclosure marketing program is called HomePath. Here, you’ll find a large number of listings that are generally more expensive than the homes on the FHA site. You will need a licensed real estate agent to make an offer, but the agent does not need to be approved by Fannie Mae.

Fannie Mae hedges against investors by allowing only owner-occupants to make offers on properties during the first 15 days a home is listed (except in Nevada, which gives 30 days).

Eligible buyers are owner-occupants (buyers who will occupy the property as their principal residence within 60 days of closing and will maintain their occupancy for at least one year), public entities and their partners, and some non-profits.

For properties that survive the first 15 days, Fannie uses bulk sales and live auctions to attract investor buyers.

Fannie Mae offers a HomePath Mortgage, which allows a buyer to purchase a Fannie Mae-owned property with a low down payment, no lender-requested appraisal, and no mortgage insurance. Expanded seller contributions towards closing costs are allowed.

The HomePath Renovation Mortgage allows buyers to purchase properties that require light to moderate renovations. One loan amount includes the funds for both the purchase and renovation—up to 35 percent of the as completed value (no more than $35,000).

Both loan programs are available to owner-occupants and investors.

Freddie Mac

Freddie Mac calls its foreclosure-marketing program HomeSteps, and it offers many of the same incentives as Fannie Mae, including a First Look Initiative. This is an ongoing initiative that offers owner-occupant homebuyers—and select nonprofits engaged in community stabilization efforts—the ability to purchase HomeSteps homes during the first 15 days of listing without competition from investors.

Though only available in ten states, Freddie Mac also offers financing that does not require mortgage insurance or an appraisal, as well as down payments as low as 5 percent.

As a special incentive to buyers, Freddie Mac offers a coupon for 3 percent in closing cost assistance upon the purchase of an eligible Freddie Mac home for buyers who take its homebuyer education program. This program, called the HomeSteps Buy-A-Home Initiative, offers workshops covering credit, financial education, and the home buying process.

Don’t stop your hunt for a foreclosure until you have checked out these government sources, which all offer online listings as well as programs designed to promote homeownership.

Steve Cook is executive vice president of Reecon Advisors and covers government and industry news for the Reecon Advisory Report. He is a member of the National Press Club, the Public Relations Society of America, and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate companies, financial services companies, and trade associations, including some of the leading companies in online residential real estate.