subject: Real Estate: How To Buy Hud Homes [print this page] In 1968 the federal government established HUD or The U.S. Department of Housing and Urban Development. The original intent of the organization was to manage community development and federal housing.
When HUD was formed a number of other agencies were combined and HUD was placed in charge of these. The Federal Housing Administration or FHA was one of these. Starting in 1971, the agency was referred to as HUD/FHA together.
How does HUD get Property?
FHA programs work to give lenders insurance for borrowers. These banks, savings and loans, and mortgage bankers lend out money to borrowers and investors and the FHA gives insurance in case that borrower defaults on the loan. A HUD lender may accept your request to obtain a loan. You will receive the money and HUD sends the lender an insurance policy protecting them from any loss that may occur during the course of the loan if you fail to meet your part of the agreements.
HUD homes get sold to the general public population when a mortgage that has been included by FHA/HUD is foreclosed on. HUD is responsible to pay the amount of the original loan to the lender and then to recover some of their costs they re-sell the home on the market.
The lender can foreclose on the home itself if it desires when the borrower doesnt meet their obligations to pay the payments. These costs are then sent off to HUD in the insurance policy and HUD will reimburse the lender for all their costs while HUD owns the home now and is free to do whatever they like with the home.
Why does HUD sell their properties?
A HUD home must be purchased directly though a HUD broker who has been both licensed and approved. Any offers that are made on the property must go through them. Due to HUD properties being priced low, they are sold as-is and no loans are allowed for the purchase. In other words, the purchaser must have to have financing already arranged before your offer will be considered.
Finding HUD Homes
HUD homes can be found by looking in newspapers, talking to a real estate agent who deals in HUD homes, or even by calling HUD themselves. Many real estate agents are registered with HUD. If you contact the agency themselves they will probably give you a listing of agents in your area authorized to sell HUD homes.
Buying HUD homes
Once you have a list of possible HUD homes to purchase find a way to narrow the list down either by price, location, or ideal home type. You may also want to drive past it to get a look at it. HUD also requires that people who purchase these homes be owner occupied meaning you cannot rent the home out. You must first live in it for a year.
Once you have found a property youre interested in contact the agent who works through HUD. The listing will specify whether or not it can be insured with them again. If it cant, be sure you know why.
If after youve done all your research you determine you want the home complete the paperwork including a 5 percent deposit by form of either cash, check, money order, or a letter that states you are approved for credit.
After you have put your bid in, you have 30 days to close on the home through escrow. Some extensions are possible if made through HUD with written approval for the extension with reason. One typical reason extensions are granted is when the financing is through a private lending and the loan application process is taking a bit longer.
