HUD Homes Explained:
A HUD (U.S. Department of Housing and Urban Development) home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. When this happens, HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors. If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home.
Why Do I need a Realtor to Buy a HUD Home?
When HUD takes ownership of a property, it first secures the property from vandalism or damage and then determines if the property will be sold directly or through an outside broker.
If a broker is used, he must complete the necessary repairs required by HUD, secure the property, advertise the property, accept sealed bids, control the escrow account and make sure the escrow closes.
Authorized HUD brokers will receive lists of HUD properties before the general public does. As a result, if you want to purchase a HUD home, call Leon and Tina now to best define your ideal location and house requirements so that we can inform you as soon as potential homes come on the market.
Before Buying a HUD Home, Get an Inspection:
HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs. Since the new owner will be responsible for making needed repairs, HUD strongly urges every potential homebuyer to get a professional inspection prior to submitting an offer to purchase.
If you are interested in acquiring a HUD Home that is in need of repair, you may be interested in applying for an FHA 203(k) Rehabilitation Loan. When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. Click here for more information about FHA's 203(k) Rehabilitation Loan Program.
HUD does not provide direct financing to buyers of HUD Homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender. If you have the necessary available cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. While HUD does not provide direct financing for the purchase of a HUD Home, it may be possible for you to qualify for an FHA-insured mortgage to finance the purchase.
Good Neighbor Initiatives:
FHA REO properties located in designated Revitalization Areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments.
Call Leon and Tina and let us answer your questions and assist you in your search for your new home.