September 6, 2011
A HUD home, also known as a HUD REO property, is described by the FHA as “a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.”
HUD homes are good deals because they are offered at a discount and are sold as-is. That means there is no insurance on the property and borrowers are strongly encouraged to get a home inspection prior to committing to the sale. In some cases a HUD home may not require repairs, but in others these homes make great fixer-upper projects.
Best of all, according to the FHA official site, “Anyone can purchase a HUD Home as long as you have the cash to purchase the home or you can qualify for a loan to purchase it.”
Borrowers looking to purchase a HUD home sometimes wonder if HUD offers financing for these properties. According to the FHA, “HUD does not provide direct financing to buyers of HUD Homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender.”
“If you have the necessary available cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. While HUD does not provide direct financing for the purchase of a HUD Home, it may be possible for you to qualify for an FHA-insured mortgage to finance the purchase.”
Those purchasing a HUD home in need of repairs should investigate the FHA 203(k) Rehabilitation loan, which provides financing for both the purchase and repair of a property. But before you can actually purchase a HUD home, there is a bidding process all buyers must participate in.
The FHA advises, “HUD Homes are sold through a bid process and you will need a HUD-approved real estate agent to assist you with that bid process. HUD will even pay that real estate agent’s fee.”
Borrowers need to find a local real estate agent and have the agent submit a bid on the borrower’s behalf during what’s known as the “offer period”. We’ll cover what happens after that’s been accomplished on our next blog post.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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