The real estate industry offers different opportunities to people; some are concealed and others on the surface; HUD Homes are just right in the middle. They are neither hidden nor popular; you can own a HUD home with little research and consultation. But before that, let’s look at what is a HUD Home.
What is a HUD?
HUD is an acronym that identifies the U.S. Housing and Urban Development department. According to Fortunebuilders.com, this is the federal government’s cabinet tasked with providing quality affordable housing to all communities.
HUD Homes Meaning: HUD homes are properties foreclosed because previous owners defaulted on their Federal Housing Administration (FHA) mortgage loans. The Hud Properties are owned by the Department of Housing and Urban Development.
How Does HUD Homes Work?
First, there should be an individual who has defaulted on their HUD-insured mortgage, and their home is foreclosed. HUD clears the mortgage of such individuals and takes ownership of their homes. HUD places these homes on auction, whereby interested buyers can bid.
Who Qualifies for HUD Properties?
The HUD homes are inclusive; anyone who can qualify for loans or has the money to purchase a HUD home is eligible. The best thing is that these homes are offered on an owner-occupant basis; investors are given the second slot. Additionally, when you plan to buy HUD homes, you must be willing to live in the property as your primary residence for at least a year, and you should not have purchased another HUD home in the past two years.
How to Buy HUD Homes
Buying a HUD home is not the same as buying regular homes because HUD homes are not listed on different listings services. You will find them listed on the HUD’s website (hudhomestore.gov), whereby the details of each home are stipulated.
On this website, you will find homes for auction, and you have to bid for the home that interests you. The bidding on a HUD home is not different from any other auction you have experienced; the only difference is that you should look for a real estate agent approved by HUD for them to bid for you.
HUD gives the owner-occupant buyers 30 days to make their bids. When the 30-day period ends, HUD will go through all the bids and choose the best offer. If none of the offers meets the threshold, then bidding is extended, and this time, investors are welcome to bid on the listings.
If your bid wins the auction, your real estate agent will be contacted to give you the details of completing the purchase. Each auction winner is given 30 to 60 days to close the purchase. During this period, you’re expected to get insurance, conduct an inspection, and maybe remove any contingencies.
HUD First-Time Home Buyer Programs
HUD understands the hassle of owning your first home; thus, they provide first-time home buyers with assistance. According to Fortunebuilders.com, these incentive programs ensure more people have access to the HUD benefits.
- HUD $100 Down Program: qualified buyers are exempted from the 3.5% down payment and instead pay $100.
- $1 Home Program: qualified families are offered homes that have been on the market for over six months for only $1.
- Good Neighbor Next Door Program: civil servants, like firefighters, teachers, and police officers, are offered a 50% discount on their bids.
Benefits
- Low pricing, below market value.
- Affordable to low down payment.
- First-time Buyer assistance programs.
- Owner-occupants are given priority over investors.
Drawbacks
- Regardless of the condition of the house, there are no renovations offered.
- Only HUD-approved real estate agents can bid on HUD homes.
- Owner-occupant buyers are restricted from selling the house for at least one year.
HUD Homes Rundown
HUD homes are perfect alternatives for people who have not found homes in the regular real estate market because of the competitive nature and high pricing of homes. At the same time, you’re not guaranteed you’ll get the best deal; most of the time, HUD homes don’t amount to their purchase price.
Before settling on a HUD home, do due diligence and ensure you understand what home you’re buying. This can be achieved through an inspection that can be conducted before an offer is made. Due to the nature of these homes, getting a preapproved mortgage is essential. You can get lucky; if you’re not, try again.