Most items in a loan are subject to negotiation. If you haven't signed loan papers yet, and you find that your loan has a prepayment penalty, you might offer to pay an additional closing point or so to see if it can be removed. The key at this stage is that if you agree to prepayment penalty, you should try to find ways to reduce either amount, term, or both as much as possible.

If you already have a loan, you are bound by terms of document, unless you can negotiate them. There are perfectly legitimate reasons why you may want to pay off a note early - most often, due either to refinancing or selling house. You may be able to contact your lender to see if they will waive prepayment penalty if they are able to provide refinancing. If interest rates have dropped a lot, and you can't get out of prepayment penalty, it may be worth rolling that amount into a new loan. And of course, try to get new loan without a prepayment penalty.

At auction itself, resist temptation to get into a personal bidding war, just "to beat out other guy". Have a set price limit and stick to it. Other houses will come along, and you don't have to win first auction that comes your way.

You should know that price of a home at auction is typically loan balance (if foreclosed), plus any back taxes owed, plus legal fees and other expenses in foreclosing property. This will typically be opening bid amount, and price will go up from there. Even so, it's possible to get a great deal in an auctioned house, with a little research and planning first.

Also, know that you probably won't be able to get an inspection, and are buying home "as is". If you can't do any needed repair work yourself, or can't hire it done within your budget, you may not end up getting such a bargain in end.