How to Buy HUD Homes using FHA Financing

This guide will answer some the basic questions about buying a HUD home.

For more information contact David Walter at Today Lending.

What is a HUD Home?  A HUD home is a property that was purchased using an FHA loan that has been foreclosed upon. Department of Housing and Urban Development (HUD) owns the home and has assigned an Asset Management Company to manage the sale of it.

Can I get a good deal?  Yes, you can get a great deal, but it takes patience.

Do I need a realtor?  Yes, you can’t buy a HUD home without a HUD registered realtor.

The process is complicated, so ask the agent who gave you this flyer to help you. 

Where can I find HUD homes?   www.hudhomestore.com

Have HUD homes been inspected and appraised?Yes, a HUD Representative has examined and prepared a Property Condition Report that is available on the HUD website. But we advise you to do your own inspections. The property “as is” value on the website is the appraised value.

Are All HUD homes financeable with an FHA loan?NO, they are not. On the website, on the right side of the page, there is “Listing information.” In that column, there is a line for

FHA Financing.  There are 3 possible answers: Uninsured, Insured, or Insured with Escrow:  

Uninsured:FHA will not finance these because they usually need more than $5,000 of repairs.

You will need cash or a renovation loan. Today Lending has 2 kinds of renovation loans.

Insured:  FHA will finance these homes, “as is,” with a 3.5% down payment.

Insured with Escrow: FHA will finance the home but the buyer must commit to doing repairs within 90 days of closing. Look at the escrow report for list of all required repairs. 3.5% down required and repair escrows are added to the loan amount – they are financed into the loan.

You pay for repairs out of pocket and then get reimbursed after the final inspection is done.

You can do repairs yourself, but you will only be reimbursed for materials, not your labor.

After you get the reimbursement check, you can pay down the loan balance, if you choose.  

Other Important Info:HUD will pay 3% of the purchase price for the buyers closing costs for owner occupants and requires $500 to $2,000 earnest money. It takes around 45 days to close.