HUD homes are residential properties sold by the Department of Housing and Urban Development (HUD) after a family forecloses on a mortgage insured by the Federal Housing Administration (FHA). Many people wonder, “What is a HUD home?” when searching for properties to buy. Whereas a bank usually assumes ownership of privately financed home that has been foreclosed on, the HUD takes ownership of foreclosed houses that have received FHA financing.
The HUD Home Store lists a variety of properties that you can browse through if you are interested in purchasing this type of house. HUD homes for sale vary in price and location, but they can be found just about anywhere in the country, in a variety of different cities and rural areas. The process of getting a home involves searching for available houses in your area, obtaining financing, submitting a bid and having the home inspected.
Who is eligible for an HUD home?
HUD houses for sale are available to many different people and entities who would be interested in purchasing homes. Any of the following buyers are eligible to purchase a home:
- Real estate agents and brokers
- Government agencies
- Nonprofit groups
- Any other buyer
Initially, HUD foreclosed homes are offered to owner-occupants, which is simply a term for individuals who plan on living in their homes as their primary residences. If no owner-occupants bid on a home during a set period of time, the home is made available to all other entities, including investors, nonprofit groups and others listed above.
When asking, “How do you qualify for a HUD home?” keep in mind that you will need to have cash on hand or a loan in order to pay for the home. If you are unable to cover the purchase price of a home from the HUD on your own, and are not eligible for financing from a lender, you may not be able to purchase a house through this program.
Where to Find HUD Homes for Sale
Before you can start buying a HUD home, you will have to look at available listings in the area where you want to live. The HUD Home Store is where you will find all of the properties for sale in your area. The store allows you to search using a variety of criteria, such as your desired state, county, city, price range, house size and more.
After entering your search terms, a variety of available properties matching your criteria will appear. Keep in mind that some areas of the country will have far more homes to choose from than others. At any rate, HUD listings change regularly, and you can always repeat a search at a different date, in order to see new available properties.
The Process of Buying an HUD House
After locating HUD properties in which you are interested, you may begin the process of buying a home. Remember, HUD home listings are initially only available to owner-occupants for a set period of time. During this period, if you would like to purchase a home, you will need to place a bid on it. If you are a first-time buyer or are not registered with the HUD, you may need to have a realtor place a bid for you. Download our comprehensive guide for more information on finding a broker to place a bid on your behalf.
Keep in mind that if you are an investor or any other type of buyer, you will need to wait until the owner-occupant bidding period has ended before you can bid on a property yourself. The status of a home, as well as the list of people eligible to bid on it at any given time, will be indicated on the home’s listing.
Overall, the process of buying an HUD home is similar to that of purchasing a home through other means, aside from the fact that you must place a bid on a house, rather than submitting an offer. You will still need to have the money to pay for your home, or arrange financing to cover your mortgage. Furthermore, a home inspection is an integral part of the buying process, whether you are getting a home from the HUD or any other type of property. You will also need to go through a standard closing process to complete the purchase.
Paying for a HUD House
When looking at HUD owned homes, it is important to be aware that you cannot get financing from the HUD. Instead, you will either need to have the cash on hand to pay for your home, or you will need to qualify for financing from a mortgage lender. However, in some cases, you may be able to get an FHA-insured mortgage in order to pay for your new home.
HUD houses may be available at a reduced cost if you are looking for homes in revitalization areas and you are a teacher, a police officer or another type of emergency personnel. Such price reductions are available through the Good Neighbor Next Door program.
HUD Home Inspections
When looking at HUD home listings, keep in mind that any property you are seriously considering should be inspected, just as you would inspect any other home for sale. The HUD strongly recommends that you use a professional home inspector before you finalize a home purchase.
At any rate, it is important to keep in mind that the HUD does not provide a warranty for the condition of any of its properties, nor does it assume responsibility for repairs or defects that may be found during an inspection. Learn more about the process of inspecting homes from the HUD by downloading our detailed guide.
Many HUD properties for sale are in need of renovations or repairs. In the event that your home needs to be modernized or fixed up, you may qualify for a loan from the FHA to cover the costs. No matter how you plan on paying for repairs, it is important to be aware that the HUD will not take responsibility for any damages that you report after closing on your home.
What Are FHA Loans?
The Federal Housing Authority (FHA) insures mortgages and approved lenders to offer mortgages to eligible borrowers. Although available to all home buyers, the requirements of the loan make it attractive for first-time buyers. FHA-approved mortgages typically allow buyers to provide a smaller down payment and apply with a lower credit score than standard home loans. FHA loans covers many needs, including energy efficiency repairs and mobile home financing. Find out about FHA loan benefits in our guide.
Who Is Eligible For An FHA Loan?
If you are interested in getting a home loan through an FHA-approved lender, you must meet program requirements. The most important factor is choosing a mortgage provider approved by the FHA. Employment history is another crucial eligibility factor, as lenders will require proof of employment for the previous two years. Lenders will review your potential expenses, lending histories and your current debts to determine if you can pay your mortgage. Find out more about FHA loan eligibility by downloading our guide today.