A HUD home is probably one of the cheapest houses you can buy in real estate. It is because they are 1 to 4 units of residential houses that were foreclosed by the Federal Housing Administration (FHA) for failing to pay FHA-insured mortgage. Most HUD homes are single family dwellings that you can view in the HUD homes websites like hud.gov. Many of these homes are still in the best condition so coming in cheap would be the best bargain for your hard earned money. If you are looking to buy HUD homes for your family, bear in mind that you have to qualify for it first. Not everyone can buy a HUD home easily. There are some things you should consider. Here is how to qualify for a HUD home, read on.
- Get a HUD accredited broker. There is no way you can participate on an online bid or any bidding being held by the FHA unless you go through a HUD accredited real estate broker. You can find these accredited brokers in the HUD website or when you locate HUD properties through a listing service like hudhomestore.com. This website contains frequently asked questions as well that can help you find any kind of query you might have.
- Be sure to pre-qualify for a loan. It would be hard if you start bidding on HUD houses and learn that your housing loan has been denied. Make sure you have the qualifications to avail a loan. Settle past dues or any kind of credit you have that would tag you as a “bad credit.” Then act on bidding only when you are pre-qualified.
- You should know that HUD does not directly provide the HUD home financing. Your loan should be from a mortgage lender or if you have ready cash reserves. Another loan you can avail would be applying for a FHA-insured mortgage.
- Make sure you have money for initial payments. You would need to pay for a down payment and a deposit which they call “earnest money deposit.” An earnest money deposit will vary. It can sometimes be as affordable as $500 depending whether the property you are aiming for is qualified for FHA financing. The usual down payment is around 5% to 20% but if you’re pre-qualified for the financing, it can go down to 0% or 5%.
There are special considerations given to people who have lost homes due to natural calamities like earthquakes or floods. Applicants who were displaced by hurricane Katrina have special discounts when they purchase a HUD home.
There are reduced prices as well for people who are in public service like teachers, police officer, fire fighters or paramedics. Even if HUD doesn’t finance the home, FHA financing can be easier to avail if your profession is one of these.
- Get a professional home inspector. HUD doesn’t allow you to inspect the homes for sale yourself. It is in their procedure that you are responsible for any repairs that the house you bought might have. In this case, hire a professional home inspector who is accredited by the FHA. You can find some listings at the HUD website at hud.gov.
Once your bid is accepted, expect a notification by the FHA accredited broker you hired in the next 48 hours. You should close the deal within 2 months or your bid would be removed from the bidding and the house will be sold to the next bidder. Good luck!