A Quick Summary of the HUD Program and What It Offers You
The options for buying a home with no or low down payment has pretty much evaporated with recent housing market crash and credit crunch. However, there is one option still available in Florida and that is buying HUD homes for sale using the HUD $100 Down Payment Program.
A HUD home is a property that has been foreclosed on that has been foreclosed on that originally used FHA insured financing to purchase the property. The lender foreclosed on the property and HUD then reimbursed the lender for what is owed to the lender and HUD takes ownership of the property.
After HUD takes ownership they will start the marketing process by assigning the property to their Asset Manager in the district that the property is located. The Asset Manager will secure the property and assign it to a Field Manager. The Field Manager then prepares the property for sale. It is then listed with a local HUD-approve Real Estate Broker. This is when the property is made available to the public for sale.
Now the good part from the Buyer’s standpoint, the HUD $100 Down Payment Program. To take advantage of this great program you will have us use FHA financing to purchase the property. The normal down payment for a FHA home loan is 3.5%. The main reason HUD offers the $100 down payment program is to sell HUD foreclosed homes fast and also to get an owner-occupant in the homes. This program is only for people who are going to buy the homes to live in. It is not for investors.
Of course this is a government program which means there are some strings attached to the program:
- As mentioned above, the $100 Down program is for owner-occupants only.
- You have to use FHA financing to purchase the home.
- It is HUD homes for sale only, which are homes that have been foreclosed on that was purchased with FHA financing.
- Even though you only have to pay $100 down payment you will still need the required earnest money. HUD requires a buyer to submit with the Purchase Contact earnest money of $1,000 if the purchase price is over $50,000 and $500 if the purchase price is under $50,000.
This program is not nation-wide; it is currently being offer in about half of the states. Florida is one of those states. A word of caution, you need to make sure that the real estate agent that you use is experienced in selling HUD homes. Buying a HUD home is a lot different then the normal real estate transaction. An inexperienced agent can cost you thousands of dollars.
The HUD $100 Down Payment Program is a great way to purchase a home if you do not have a lot of money for a down payment. It will give you the opportunity to buy a home now while the home prices and the interest rates are low!
Unlike most homes for sale, HUD Homes are sold through bids placed by HUD approved Realtors on its website.
1. $100 Down Payment Program
Many lenders/banks offer a special FHA mortgage program designed only to purchase HUD homes with a minimum down payment of only $100 regardless of the price of the home
2. No Appraisal Fee
HUD orders and pays for the appraisal. As long as it is less than 4 months old when your loan is in underwriting it is generally accepted and used. If it is over 4 months or even 6 months old, you will be required to order and pay for another one.
3. No Inspection Fee
HUD orders and pays for a detailed Property Inspection Report which you will receive once under contract.
4. Typically 45 Days to Close
Although the time frame could vary, most contracts allow for a reasonable closing time frame of 45 days.
5. Ability to Set Up Escrow for Repairs (out of pocket)
Many lender/banks do not let you close on your home if there are deficiencies with the home. With HUD homes, you have the ability to escrow for repairs and perform them after you close. Oftentimes, the escrow is funded by you however.
Some of the most common misconceptions with the purchase of HUD homes are:
I cannot ask HUD to pay part or all of my closing cost.
WRONG. HUD does allow for closing cost concessions. However, as with any other real estate transaction, you may make your offer less attractive in a bidding situation.
I have to use FHA financing.
WRONG. While there are incentives for FHA buyers and thus owner occupant buyers (such as early bidding), you are not required to use FHA financing. You may use conventional financing or pay cash.
I can use my Realtor of choice.
WRONG. As in any other real estate transactions, HUD allows for a listing and selling realtor. However, both have to be approved and registered with HUD.
I cannot inspect the home.
WRONG. While every HUD home comes with a Property Inspection Report, given to you once you win the bid and thus are buying the house, you are able to still inspect the home on your own or with a licensed home inspector.
I do want to point out one downside:
As with any government owned foreclosures, the seller is congressionally exempt from paying sales tax. Thus, you will pay your documentary stamps/state tax on the mortgage (35 cents per $100), your intangible tax/county tax (20 cents on $100) plus the sellers documentary stamps/state tax on the Deed (70 cents per $100).
Regardless of the financing tool you intend to use
HUD homes are worth exploring.
FIND OUT WHAT HUD HOMES ARE CURRENTLY FOR SALE
I am well versed in the sale of HUD homes and both myself and Charles Rutenberg Realty are registered and approved with HUD.
If you would like to discuss this with me, please contact me and I will show you how you can take advantage of this one-of-a-kind program that allows you to become a homeowner and start building ownership equity. We can set up a HomeFinder HUD Listing Alert so that you will be notified whenever a HUD property comes onto the market.