If you’ve started searching for a new home to purchase, you may have stumbled upon some homes for sale that are referred to as “HUD homes.” These homes were financed by previous owners through FHA loans and were foreclosed upon. Now, they are owned by the Department of Housing and Urban Development (HUD) and the department is attempting to sell them to the public to recoup some of the loss. There are specific characteristics to be aware of when it comes to HUD homes, including:
- These homes are sold as-is.
- Potential buyers must enlist the assistance of a HUD-registered real estate professional to bid on homes.
- Property inspections must be obtained and paid for by potential buyers.
Many home buyers let the HUD classification scare them off because it is often associated with a home in need of repair and a lengthy closing process. However, if you take the time to learn more about buying a HUD home and the specific characteristics of the home you’re interested in, you may be able to get a great deal you never would have dreamed of obtaining through the traditional market. Before you write off available homes that are for sale by HUD, review these five advantages and give HUD home listings a chance.
1. Tons of Inventory
HUD usually has numerous homes for sale in all areas, including downtown and rural locations. If you already know where you want your new home to be located, you can begin searching for HUD homes in that area. You should be able to find a few listings to investigate in the neighborhood or community you desire. HUD homes are usually one-to four-unit residential properties, so available listings are always vast. Potential buyers can locate many different types of HUD properties for sale, including:
- Single-family homes.
Once you have decided the type of property you desire and the specific characteristics you consider must-haves, you can browse through HUD inventory to see if there are any units available in the location you want to live in. Many potential buyers are surprised by the number of HUD properties currently for sale in desirable areas, so do not miss out on this opportunity.
2. Cheaper Listing Prices
The longer HUD keeps a property, the less money the department of housing makes. You can benefit from HUD’s rush to get rid of properties by taking advantage of lower listing prices. When browsing through HUD properties, you will often find that the listing prices are less than the prices on the traditional market. You may be able to afford a larger home, a home with more upgrades or a property in a more sought-after location if you purchased a HUD listing instead of a home on the traditional market. This price break is especially helpful for buyers who prequalified for loans in price ranges they were unhappy with, as an inexpensive HUD listing price can allow these buyers to choose more desirable properties.
There are also specific discount programs available through HUD for qualifying buyers, such as the Good Neighbor Next Door Initiative. To qualify for this program, you must currently be a teacher, emergency medical technician, firefighter or law enforcement officer and you must purchase a HUD home that:
- Is located in a designated revitalization area.
- Is designated for the Good Neighbor Sales Program.
- Includes a second mortgage note for the discounted amount.
- Buyers must live in for at least three years.
If you qualify for this program, you may be able to purchase the HUD home at 50 percent of the already discounted listing price.
3. Financial Assistance
HUD offers additional incentives if you buy one of its homes, including financial assistance with the closing process. HUD assists qualifying buyers by taking care of the escrow fees, which can usually save a HUD home buyer $350 to $900, depending on the specific situation.
In some cases, HUD also offers to pay up to three percent of the closing costs for the home. If you’re interested in a HUD home but aren’t sure if you can afford it, keep the potential financial assistance available through the department of housing in mind.
4. FHA Loan Qualifications
Many HUD home buyers qualify for Federal Housing Administration (FHA) loans, which can offer lower interest rates, reduced down payments and less strict credit eligibility guidelines. The FHA is also known for offering incentive programs to first-time home buyers or for HUD home buyers in general. If you’re planning to finance your home through an FHA loan, you should look into the programs currently available to see if you qualify for additional benefits or incentives when purchasing a HUD home. The financial assistance offered through loan programs can help you to qualify for a home with a higher listing price or a home in a different location you originally didn’t think you could afford.
Since HUD homes are sold as-is and may require some repairs before moving in, you may also qualify for an FHA Rehabilitation Loan. This loan is rolled into your regular FHA home loan and allows you to borrow money on top of the home’s purchase price. This money is provided up-front and can be used to fund repairs or updates on the home before you move in.
5. Owner-Occupant Priority
If you’re buying a home to live in full-time, you can gain access to HUD home listings before any investors or other buyers. In a traditional market that is saturated with buyers, investors seem to be able to snag potential properties quickly because they can usually offer cash closings and higher price points. Bidding wars are also common, which can be frustrating for buyers who have their hearts set on a specific property.
When HUD homes go on the market, the department offers a 30-day grace period where only owner-occupant buyers can bid on the available properties. If you are seeking a home to live in, this gives you a distinct advantage over investors and narrows down the competition for available homes.
As you peruse local home listings, don’t rule out potential winners simply because they’re listed as HUD homes. By learning about these HUD home purchase advantages, you can be informed about all properties for sale on the market today and be less likely to miss great housing opportunities. Browse through available HUD properties and find your perfect home at a better price!