This is one government agency you want to know about, especially if you’re looking to buy a home. HUD creates opportunities for homebuyers to purchase while saving tens of thousands of dollars. Here’s some information about HUD and the deals available to you.
HUD is an acronym for the U.S. Department of Housing and Urban Development. It’s the government agency tasked with combating poverty by giving people access to decent housing that is affordable and inclusive. The department was first established in 1965 as a broader initiative against poverty in the U.S.
HUD is led by a secretary who is a presidential appointment and must be approved by the Senate. The HUD secretary oversees the Federal Housing Administration (FHA), leads community development programs, and provides rental assistance for people in need.
HUD uses the FHA to provide mortgages for people who wouldn’t usually qualify. A mortgage insurance program by the FHA gives people on low income or with bad credit the opportunity to buy homes. The program is secured by the government.
Related: What Are The Different Types of Mortgages
A property becomes a HUD home when the owners cannot pay the monthly mortgage, and the home goes into foreclosure. These homes were first purchased with FHA loans. So when the owners default on the loan, the FHA pays the lender the remaining mortgage and seizes the property.
To recoup that money, the government sells the property—usually below market value. HUD homes are appraised to establish value, but they are sold “as is.” This means that no prior repairs or improvements are made. So do your due diligence when picking out your home.
Anyone who qualifies for a loan can purchase a HUD home. Investors may buy these homes, but they are first made available to owner-occupant buyers (people who will live in the home). Buyers must not have purchased a HUD home in the last two years and must live in the new purchase for at least a year.
To incentivize HUD home purchases, the agency offers grants, vouchers, and buyer programs:
Related: Buying a Foreclosed House
The process of buying a HUD home differs from a traditional home purchase. HUD homes are not listed with other homes on the Multiple Listing Service. You’ll have to go to the HUD website.
The homes are sold at auction. A HUD-approved real estate agent must help you view and bid on the property. Bidding is open for 30 days, prioritizing owner-occupant buyers. If no acceptable bids are received, the auction opens to investors.
If your bid is accepted, HUD gives you a settlement date, usually allowing 30–60 days to close.
If you’re in the Orange County area and looking for a mortgage, we provide mortgage brokerage services. Contact Mares Mortgage today.
Buying a HUD home isn’t very different from a regular home purchase. All buyers can use conventional loans or opt for government-backed options. Veterans and service members can use VA loans, while low-income or poor-credit buyers can use FHA loans.
Buyers can also use an FHA 203(k) loan to cover both the home purchase and repairs.
Here are some benefits of purchasing a HUD home:
Related: How to Get a Home Improvement Loan
Here are a few drawbacks to consider:
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For anyone struggling to purchase a home, a HUD home might be the right opportunity for you. But make sure you go in with your eyes open. Inspect the home and understand all costs and requirements before you buy.
