There are several options available for anyone interested in purchasing a home. Most options depend on what financing the potential owner qualifies to receive. One of these options is for the person to purchase a HUD Home. A HUD home that is available for purchase is typically a home that had a previous owner foreclose on an FHA-insured mortgage.
Any person can purchase a HUD home with the help of a real estate agent and the ability to pay for the home with cash or by pre-qualifying for a loan.
Prior to making an offer on a HUD home, it is necessary to hire a home inspector to examine the home for potential issues. There is a high risk associated with foreclosed homes because the previous owner chose to vacate the home. There is a good chance the home may be in poor condition and require substantial repairs. The potential owner will be better equipped knowing in advance about any required repairs before making an offer on the house. The cost of the needed repairs is a factor in the purchase of the home since it drives up the potential owner’s initial out-of-pocket cost.
If a person interested in purchasing a HUD home is unable to qualify for a standard loan, a discount program and two FHA financing options are available for people who qualify. The Good Neighbor Next Door discount program is available to firefighters, emergency medical technicians, elementary through high school teachers, local governments, and non-profit companies. In order to qualify for the discount, the HUD home must be located in a designated revitalized area. The discount requires the person to live in the home for 36 months in order to qualify for a 50% discount off the appraised value of the home.
The first financing option is the FHA Mortgage Insurance. This option provides the mortgage lender protection in the event the homeowner is unable to continue paying the mortgage. Because of this protection, the lender is more likely to provide a loan to the person interested in purchasing the home. In order to qualify for an FHA-insured mortgage, there are requirements that both the home and the potential owner of the home must meet. The residence itself must not exceed four family units. There are mortgage limit requirements that vary by state and number of family units in the residence. Other qualifications include meeting standard FHA credit requirements.
The second financing option is an FHA 203(k) Rehabilitation Loan. Following the inspection of the home, if the inspector determined the home requires repair, the potential owner has the option of financing both the home and the cost of repair either through separate sources or by qualifying for the FHA 203(k) Rehabilitation Loan. There are requirements for qualifying for this loan that are similar to the requirements of an FHA-insured mortgage.
Learning More about HUD
For more information regarding HUD homes and financing, there are many sources available such as the HUD.gov website, local HUD Management and Marketing Contractors, local realtors, and the FHA Resource Center. The HUD.gov and FHA Resource Center contain many resources regarding how to purchase a HUD home, obtain financing and locate FHA approved lenders. Local Management and Marketing Contractors manage the properties owned by HUD homes and are responsible for the sale of the home. Qualified realtors can also assist people interested in purchasing a HUD home with any questions regarding the process.