Buying a HUD home can save you money on the cost of a home in your community as these properties are typically priced below their market value in order to initiate a quick sale. HUD housing are properties that are acquired by the U.S. Department of Housing and Urban Development after foreclosure on an FHA-insured mortgage. Homes are sold as-is, but most properties are in pristine condition.
To purchase a HUD property, you will need to find a lender and real estate agent that are authorized in the sale of these homes. Additionally, it is essential that you familiarize yourself with these properties in order to ensure that you complete all of the necessary steps for purchase as well as maximize your saving opportunities.
By taking the time to learn more about HUD homes, you will be better prepared for this unique home buying process.
What are HUD Homes?
A HUD foreclosed home is a 1- to 4-unit residential property that has been acquired by HUD after a foreclosure on an FHA-insured mortgage. Homes are often priced low in order to recoup the loss of a foreclosure claim as quickly as possible.
Anyone can purchase a HUD property. However, the Department of Housing and Urban Development initially offers all properties to prospective buyers that intend to live within the home as their primary residence before a property becomes available to all types of buyers, including investors.
1. Learn How to Submit a HUD Housing Application
If you are interested in buying a HUD home, you must be able to either provide the listing price up front or obtain financing through an approved lender. HUD does not provide mortgages to homebuyers directly.
If you are interested in HUD housing, but you have poor credit or income, you may still qualify for a mortgage by participating in a federal insured mortgage program, such as the FHA loan program. FHA loans and similar programs can reduce your eligibility requirements for a mortgage, including credit score, income and down payment related qualifications.
While not required, it is recommended that you find a real estate agent that is familiar with the sale of HUD properties. A real estate agent can provide several benefits, including the ability to help you narrow down your search for properties and assist with any negotiations that you might engage in.
2. Learn the Importance of an Inspection Prior to Buying a HUD Home
When reviewing HUD houses for sale, it is crucial that you have an inspection performed by a licensed professional home inspector before submitting an offer on a home. HUD homes are properties that were obtained in a foreclosure. These properties are sold “as-is” and the HUD does not provide a warranty of any kind for properties.
If a home does have significant damage, HUD will not cover the cost of these damages. However, you may be able to obtain financing with a FHA 203(k) Rehabilitation Loan, which can be used for repairs and modernization projects.
3. Find Out Where to Locate HUD Homes for Sale in Your Community
The HUD home store is the best place to find HUD property listings within your local community. The HUD store offers superior search functionality with several filters that can be used to narrow down your search, including:
- State county, city and zip code.
- Price ranges.
- The number of bedrooms and bathrooms.
- Buyer type.
- The home’s status.
- A home’s individual property case number.
Each property listing includes additional information about the property, including the year that it was built, pictures, the amount of rooms within the home and special features, such as a garage or basement.
If interested in buying a HUD home, your real estate agent will likely be able to help you narrow down your search as well as make arrangements for you to see a property.
4. Get Info on Additional Saving Opportunities on HUD Houses for Sale
HUD homes for sale are often listed well below their market value to generate a quick sale. Therefore, the purchase of one of these properties often saves homebuyers money upfront. However, there are additional savings available to qualifying teachers and first responders through the Good Neighbor Next Door program.
The Good Neighbor Next Door Program is designed to assist and promote homeownership within communities. Certain homes listed within the HUD store that are located within revitalization areas will be listed for sale exclusively for seven days. Homebuyers that meet the eligibility requirements of the Good Neighbor Next Door Program can receive substantial discounts of up to 50 percent off the listing price of a qualifying HUD property.
In order to save money on a HUD foreclosed home through this program, you must hold one of the following occupations:
- Law officer.
- Teacher (pre-kindergarten through 12th grade).
HUD housing applicants must be considered full-time employees in their given occupation in order to qualify. Additionally, prospective buyers must work within the community that they intend to purchase a home in.
To qualify for discounts through the HUD’s Good Neighbor Next Door program, you must be willing to commit to live on the HUD foreclosed home for a minimum of 36 months as your sole place of residence. You will be required to sign an additional mortgage and promissory note to receive the discount.
The second mortgage will include the discounted amount that will be removed from a HUD property’s list price. You will not be required to repay the second mortgage amount or interest of the amount, so long as you fulfil the occupancy term requirement. Should you fail to fulfil the agreement, repayment will be required. While the Department of Housing and Urban Development does offer additional discount programs on HUD homes, other discount programs are only available to certain nonprofit and charitable organizations.