HUD Home Q&A

22 Replies

HUD Home Q&A

What is a HUD Home?
A HUD Home may be a single-family house, a townhome, condominium or other type of residence. The properties were deeded to HUD/FHA by mortgage companies who had foreclosed on FHA-insured mortgage loans. Now HUD must sell these homes—as quickly as possible at market value—in order to obtain the maximum financial return on its mortgage insurance funds.

Who can buy a HUD Home?
Anyone who has the money or can qualify for the necessary amount of mortgage financing can purchase a HUD Home. You do not have to be low-income or meet any other such limitations.

Can I get a HUD Home for free, or for one dollar?
No. HUD acquires its properties through the foreclosure of FHA insured mortgages. One of HUD's many missions is to maximize return to the FHA insurance fund, which it does by selling the properties at fair market value.

How do I buy a HUD Home?
Our policy is to market acquired properties on a competitive basis with offers being submitted through any participating licensed real estate broker. Local brokers will assist you in the transaction. They can show the property to prospective buyers, as well as answer questions and provide information on the location of parks, schools, shopping, and employment centers.

Are HUD Homes meant for low income people?
HUD Homes come in a variety of price ranges, though most are affordably priced, making them accessible to low and moderate income Americans. What are the income requirements? If youmake a cash purchase, there are no income requirements. Otherwise, you must be able to qualify for a particular type of mortgage financing based on established mortgage lending criteria (see page 3).

How does HUD decide how much to charge for a HUD Home?
The listing price of a HUD property is a price based on the appraised value.

Can investors purchase HUD Homes?
Yes. However, HUD offers its properties to owner/occupants for a period before making them available to investors.
[i]
What happens if I can't close the sale within the time permitted by HUD?[/i]
You'll probably have to pay fees for an extension of time, usually in increments of 15 days.

Is there any way for me to get advanced notice about homes that will be coming up for sale?
No. HUD Homes are listed for sale in the local multiple listing service (MLS), the Internet at www.hud.gov or ask your broker.

[size=7]Source: Federal Citizen Information Center[/size]

A little update on the "Can investors purchase HUD homes" question.

About 6 months ago HUD changed their policy on this issue. Investors can now make bids on them from the opening week, but owner occupant's bids will have priority over non-owner occupants even if the owner occupant's bid is lower than the non-owner occupant's. Just as long as the owner occupant's bid is higher than the minimum acceptable offer.

In PA the rule is still owner occupied only for the first 10 days. Open to all bidders including investors on the 11th day.

Ryan,

How do you know what the minimum acceptable offer is?? Is that the original asking price? I'm very interested in two HUD homes at the moment and I like to be able to make an offer on one this weekend, but I'd like to know how much I should offer. Previously, I tried to make an offer on another HUD home and just got a flat out refusal. I was told by the broker the way the system works is you just keep making offers until they accept one. Well, that's a little annoying and I start to lose intrest in the house b/c there's a ton of house's in distress in MI.

Thanks!!

Locally HUD has started countering offers. I've been around this for 4 years and have never heard or seen HUD counter...

If you are interested in a HUD home and it has not sold the best formula is to keep making the same offer (day in and day out). One of two things will happen: either someone else will take interest in that same home and out bid you or HUD having no other offers will let the property go to you at your bid amount.

Oh and as far as the Dollare homes go this is true only if you are a Government or a non-profit orginization.

Yes HUD homes are typically for low to moderate income home buyers but if you obtain a home in a targeted area then you will wave some of the guidelines.

Ex: Hud Section 203 (k) Rehabilitation mortgage insurance which allows investors (who do not intend to occupy the property) to obtain a loan according to the purchase price and rehab cost.

In essence lets say you as the buyer find out you can obtain a home for $50,000 and the cost of rehab is $20,000 the loan would go something like this:

$50,000= Purchase
$20,000= Rehab
$10,500= 10% to 20% out of pocket
$36,000= Released to GC for rehab this amount is conducted by several things including 6 months PITI

$95,500= Loan amount
$100,000 after repair value

Note: any money not use in the escrow rehabilitation account will be credited to the principal balance of the original loan.

Originally posted by "loki005":

Ex: Hud Section 203 (k) Rehabilitation mortgage insurance which allows investors (who do not intend to occupy the property) to obtain a loan according to the purchase price and rehab cost.

This is not correct. See the following from HUDs Website:

21. Can an investor use the 203(k) program? No. In October, 1996, the Department placed a moratorium on investor participation in the 203(k) Rehabilitation Mortgage Program.

The 203(k) program is only for owner-occupants, not investors.

8)

Sorry about that Richard but your wrong about what I said!

I said that these types of loan are allowed in targeted areas which are also known as:

HUD's Initiative for Renewal Communities and Urban Empowerment Zones (RC/EZ) Please do look at that link below to see if there is and area near you!

www.hud.gov/cr

P.S. you will need to use the Address Locator which is on that page link I listed above..... :)

Originally posted by "loki005":

HUD's Initiative for Renewal Communities and Urban Empowerment Zones (RC/EZ) Please do look at that link below to see if there is and area near you!

www.hud.gov/cr

Ok Lito,

But you called it the 203(k) program. The Urban Empowerment Program is something different. I wasn’t even aware of this program, good job pointing it out.

8)

I know that the urban empowerment program is different than the section 203 (k) program, but if you look close enough you can find Targeted areas.

This means if you obtain a home in a targeted area they will wave the owner-occupied rule that goes along with the section 203 (k) program (due to the fact that these areas need revitalization among other things you may have not know this due to the fact that there are no revitalization areas in Colorado).

Lets face it Richard there are billions of tax-payers money that is being offer thorough these programs and are not being used. I know of many of these programs that would be very helpful to many people.

Cause the best way to make money is using the OPM technique and what better way than for that OPM to be the government. Oh and richard another reason I am going out towards your area is the fact that there are thousands of HUD listings for cheap.

P.S. Ask me what you want to do and I can guide you in the right direction, ex: I need money to rehab my house but I can't afford to get a second lien on my home.

Well there are programs that offer soft seconds that have 0% deferred interest with no monthly payments and they are forgiven after a certain time period. If sold before the time period then the loan is due plus accured interest which is equal to the original loan amount because 0% deferred interest. Loan amounts are up $50,000 I believe

There is also a Rehab program where you borrow $75,000 where only $15,000 has to be used for rehab and there rest can be used to pay down an existing first lien. There are two options one can take to repay this loan one is a 15yr term loan at 3%, well the offers 0% interest rate with no monthly payments for 10yrs (choose to make payments or pay in full when you ballon comes due). This can easily be solved if you are worried about a ballon payment, just put the max allowed into a rooth IRA account and let the interest build (you will have more than enough when you ballon payment comes due)!

Thank everyone!

loki,

Can an investor use the 203K program if their not in one of those 40 zones?

Hello there TC-

Well if they are not located in one of those areas no you can not obtain a section 203 (K) program loan through HUD. But there are many alternatives that one can do to still make this very profitable for an investor. For instance you do not have to buy a HUD home to qualify for an FHA loan or grant program.

Also you can obtain down payment assistance through the
Neheimah Coporation http://www.nehemiahcorp.org/

They offer up to 6% of the the final contract sales price that can be place towards your closing cost and down payment! Once you have your flip property you can obtain help through certain government programs and grants such as the CDBG or Community Development Block Grant!
Funds can be distributed for major and minor home repairs, and grants are given at the state, county, and local level (check with you local HUD office to see if you state, county, and/or city has these funds avaliable). And remember if you do not get the answer you like don't give up keep trying cause life is built on play of words (you may have a good intent but are asking the wrong questions).

Also if your home was built before 1978 it may qualify for lead base paint hazard program (which includes repairs as get all brand new windows among other things, check with you local HUD office to see what else you may qualify for)! Hope this helps.... >:P

P.S. Go to www.hud.gov

there you will be able to find listings of HUD foreclosed homes and if you look in your area you can find good deals. Also if you look at the property details (not just the address and price) you will find some that are 203 (k) compatable so just ask you local HUD appoved broker about more details that I did not cover (or ask again and if I do not know the answer I bet you I know someone that does >:P) Thanks for you time TC!

This post has been removed.

James-

I would bet you all the money that I have that I know as much about those programs as I do any of the others. I plan to help house native americans by providing proper shelter for them (the government offers programs for this) and the all at the exspense of the government.

Did you know if you have a really good business portfolio to start a business or exspand one you can buy city owned property for a $1. Yeah sounds nice doesn't it is there a catch yes there is you have to own the property for 10 years in order for them to forgive the amount (the sell it to you at assesed value). Wow that sucks hun not that's awesome getting a 10,000 sqft lot for a dollar to open up or exspand your business.

This post has been removed.

This post has been removed.

Originally posted by "**********":
BTW-

How are you making money with all of the public HUD information? Are you a HUD consultant, or charging other to inform them of HUD programs or??

Oh James you insult me with this how do I make money stuff. Have you not read my postings?

If you read my postings you will understand that there is money to be made regardless if you are a homebuyer or an investor. I do not charge people for this information if they would like help getting what they need then all they have to do is ask. I am not a HUD consultant (takes too much schooling and I want to make money investing myself now not tie my time up be in class) nor am I pid by HUD in anyway and even if I was that would mean HUD is paying me not the people who want the info.

If you were well aware of the programs in the first place and you knew how much help they provide why not tell me in the first place?

The only programs most people know about are section 8 and welfare to are great regreat they do not solicit their other programs (hence I am not a consultant and if I was giving the info in such detail would be a breach of contract in one form of another)!

Thanks James I all ways enjoy your conversations!

P.S. You are questioning me in a manner that reminds me of REI, it seems like you think I am intending harm on people James and you know me better than that. Sorry if I came off as some rude way but I did not mean to offend anyonw nor did I think I was selling myself!

This post has been removed.

Originally posted by "**********":
Not my intent at all, just asking as most times you get involved in a project the intent is business, correct?
This is true but I had all ready clarified that business was not my intent. I had mentioned that my only intent was to inform those of us who do not use these programs.

Originally posted by "**********":
I didn't know you were in the market for a HUD home, as we last talked you were trying to by a home from a family member if I recall?
No you must have mistaken me for someone else and I didn't say I was in the market for a HUD home all I said was if you knew about the programs why not tell me. You do not need to purchase a HUD home in order to use the porgrams provided by them.

Originally posted by "**********":
Most people are well aware of HUD programs as most first time or assistance programs provide all the information about the various government and regional sponsored programs.

How would your giving out info be a breach of contract? And what contract?

Okay do not know of these most people you speak of but the majority of people only know of the programs that I mentioned before. If they did know about all these programs then why has so much money that is driven towards these programs have not been used? I am only trying to inform them of where to go and how to go about finding more information that will clear things up for them.

Oh and James you missed that if I was a consultanat part this does not pertain to me as I am not an employee of HUD. So I am not breaching an sort of contract what so ever for there is none, do I have to say this over and over again to get this across?

Originally posted by "**********":
Dude, your learning about government programs and thats GREAT, however some of your post have provided some inaccurate information and I know thats not your intent.
I KNOW YOU, and I know YOU would NEVER intend to HARM anyone Lito...
I don't think your coming off rude or in a manner that your selling anything including your self.
Okay James you say that I have provided inaccurate information but yet when you question me on it I have clarified the with answers. So where is this inaccurate information you speak of my friend?

Just because you can not see the wind does not mean that it doesn't exist all you have to do is ask and you shall receive information that may lead you down a different path. If you do not understand my intent with this response I will be gald to clarify if you ask.

Again I am sorry of being on the defense with response towards your postings but I only misread your intentions.

This post has been removed.

Originally posted by "**********":
Whatever Lito,

Have at it my friend!

After all that you just tell me that nothing more. Wow it seems to me that you are a man of short words these days and it was like yesterday when you and I could have hours of conversations. I guess if you want to leave it at that my friend I am very sorry that it was left that way.

Thanks again for all your guidence thus far James!

This post has been removed.

Alright James,

But Damn man you making feel like a chick cause I was like thats all you have to say for yourself (LOL). It's okay James but I too thought some of this information was a bit inaccurate (I first started by getting info from a third party and investigated), but found out if you ask (life is just a play on words so to speak) you will get the answers you are looking for.

For instance I too read the part about the section 203(k) being only for owner-occupants and was a bit skeptical when told that this was not true cause I had read it on HUD. I then contacted my local HUD office and ask a bit of questions (it was like ask me no questions and I will tell you know lies) and was later informed that HUD waves this policy if the home you intend to get this mortgage on falls in a targeted area. I was amazed to find out this information but I put my own foot in my mouth for not believing that it could be possible.

It is kind of like rules and regulations there are all ways loop holes that void the rule itself and take upon another situation. Thanks for the response James.

P.S. Oh and yeah the part of not talking to you for some time too maybe that is why I went off like it was that time of the month. (no no no I know what your thinking but I was taliking about that time wheny your returing moves and your late by one min and you get charged a late fee 8) )

Join the Largest Real Estate Investing Community

Basic membership is free, forever.