While searching for a new home, you may have come across properties listed by HUD. If you’re unsure about what exactly a HUD home is and how to buy one, the lender's
goes over what you need to know about them and we are going to dive into the basics.
HUD stands for the U.S. Department of Housing and Urban Development, and a HUD home is one in which the owner had an FHA-insured mortgage and was unable to make their mortgage payments, and therefore went through foreclosure. The Federal Housing Department
(FHA) takes possession of the property and pays the lender the balance on the loan. These homes are often sold below market value because the government does not want to hang on to these homes too long.
Besides getting a good deal on the cost of a HUD home, there are several other benefits of purchasing one:
- HUD homes are already appraised by an FHA approved appraiser, so you may be able to close faster if using an FHA loan.
- You may be able to get up to 3% of your down payment paid for.
- Preference is given to buyers purchasing for residence over real estate investors.
- HUD loan programs
3% of the purchase price towards the closing costs may be covered by HUD, and this can include things like:
- Home appraisal fee
- Home inspection
- Flood certification
- Discount Points
- Owner title insurance and more
Financing a HUD home is also great for first time home buyers using an FHA mortgage loan because of their low credit score and down payment requirements. HUD homes aren’t usually listed on real estate websites, but you can find HUD listings on the hudhomestore.com
website. You’ll need a real estate agent to bid on a HUD home, and they will be able to help guide you throughout the bidding process to successfully purchase your first home!