If you are considering purchasing a home in the near future, it may be worth taking the time to review HUD homes in within your area as these homes can often save you an exceptional amount of money due to the reduced price of the home.
Not only are HUD homes commonly offered less than their market value but you may also qualify for one of several grants or special discounts to further reduce the cost of buying a home.
Financial options for HUD properties include traditional mortgages, cash payments and the utilization of federal loan programs, such as FHA or USDA loans.
What is a HUD home?
The United States Department of Housing and Urban Development (HUD) sells homes that were previously foreclosed upon where the mortgage was backed by the Federal Housing Administration (FHA).
In order to recover some of the loss of the foreclosed-upon home, HUD homes are commonly sold at a reduced price that is below the home’s market value in order to generate a quick sale and provide low-income families a greater opportunity to become homeowners.
Understanding How to Purchase a HUD Home
Contrary to common myths, the Department of Housing and Urban Development does not issue mortgages directly to prospective HUD homebuyers. If you are interested in purchasing a HUD property, you will need to either provide your payment for the home or obtain a loan from a third-party lender or banking institution.
If you would like to purchase a HUD property but you have a poor credit score, you may still be able to obtain a mortgage through a federal loan program, such as an FHA loan. This loan program entices lenders to reduce credit score and down payment requirements as well as offer better loan terms. Generally, you must have a minimum credit score of 580 to qualify.
Learn about First-Time Home Buyer Programs
It is difficult to find first-time home buyer loans that provide substantial discounts as new homeowner applicants typically present a bigger risk to lenders as they have never purchased a home before. However, there are several first-time home buyer federal programs that new home buyers may qualify for, including programs offered by the FHA and the United States Department of Agriculture (USDA).
Find out about HUD Housing Grants
If you are part of a low-income household, you may qualify for assistance through various subsidized housing grants that can assist families in the purchase of a home. The majority of the housing grants that may be available to you are offered by the Department of Housing and Urban Development. You can learn more about these by viewing the HUD website as the HUD provides additional details regarding each housing grant available, including eligibility requirements and how to submit an application.
Discover How to Hire a Licensed Professional Home Inspector Before a HUD Home Purchase
HUD homes are sold “as is”. While most HUD properties are in great condition, this is not always the case, and the Department of Housing and Urban Development strongly considers any prospective buyers to hire a professional home inspector before making an offer on a home. The purchase of a HUD home will not include a warranty for any reason.
Experts strongly encourage that a home inspection is performed before any type of home purchase. However, these inspections are especially important in cases of HUD properties, and can help prepare you for any additional expenses that the home may face, should you choose to purchase it.
Professional home inspectors can provide a great level of detail after evaluating the home, including the state of important structures, such as the roof, foundation and interior. While the HUD does not offer any discounts towards repairs, you may qualify for an additional loan, such as an FHA 203(k) Rehabilitation Loan, to cover the cost of repairs to the home, should you choose to buy.
Learn about HUD Home Financing Options
You cannot obtain a mortgage directly through the HUD for a HUD property, as the HUD does not provide financing options for purchases. The HUD will accept cash offers, but most homebuyers will need to obtain a loan through a HUD-approved broker. If a lender is not certified for the sale of a HUD home, you will not be able to purchase a HUD property with that particular lender.
In addition to traditional mortgage options, you may qualify for an insured mortgage through the Federal Housing Administration or a USDA loan. Both of these loan programs can provide additional benefits to low-income applicants, including reduced eligibility requirements, lower or eliminated down payment requirements and overall better loan terms. However, both of these federal loan programs will require you to obtain and maintain mortgage insurance.
If you are a U.S. veteran, it is also worth taking a look at whether or not you qualify for a VA home loan. Qualifying veterans and active-duty military personnel who obtain a VA home loan receive additional home buying benefits, including reduced closing costs, the elimination of any penalty on paying the VA loan offer early and, in most cases, the elimination of any down payment requirement for the purchase of the home.
About Special Discounts on a HUD Home
The U.S. Department of Housing and Urban Development offers significant discounts to first responders who wish to purchase a HUD property. The Good Neighbor Next Door program is designed to assist communities in flourishing as well as provide discounts to law enforcement officials, firefighters and emergency medical technicians (EMTs). Additionally, teachers that teach classes between kindergarten and 12th grade or also eligible for the Good Neighbor Next Door program.
This program offers up to a 50 percent discount on the price of a HUD home. In order to qualify, the applicant must be a first responder or teacher and must commit to living within the property as their sole residence for at least 36 months (three years).
Where to Learn More About the HUD Homes Available Near You
You can view HUD property listings within your area at any time through the HUD Home store. Additionally, you can search for brokers and lenders within your area that has already been authorized for the sale of HUD properties.
If you are interested in the purchase of a HUD home, it is worth taking the time to review the HUD home store thoroughly as the website offers superior search functionality with options to narrow down your search by price, bedrooms, bathrooms and more.
Learn About Resources to Help You Find a HUD Home
Fortunately, your search for a HUD home is made simpler with the Internet. As you search online, you will find that not all apartment listing websites cater to Section 8 voucher holders. Below are some resources you can use to find Section 8 friendly homes.