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).