Frequently Asked Questions
What is a HUD Home?
When someone with a HUD insured mortgage can't meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home.
Who can buy a HUD home?
Anyone who can qualify for a mortgage or who can pay cash may buy a HUD home. Owner occupants must live in the house as their primary residence for at least one year and may not purchase another HUD home as an Owner Occupant for two years. Buyers must use a broker or agent who is registered with HUD to place a bid on a property.
How can I buy a HUD home?
Start by finding a participating real estate agent. Your real estate agent must submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all offers are opened and considered to be received simultaneously, and, basically, the highest acceptable net bid is accepted. If the home isn't sold in the initial Offer Period, you can submit a bid until the home is sold. Bids can be submitted any day of the week, including weekends and holidays. They will be opened the next business day. The results from the review of all accepted bids are posted on our website. It is the responsibility of the real estate agent to check our website for accepted bid information and ensure that all the required forms are properly filled out and sent to us within two business days of acceptance.
What is Owner Occupant Period?
When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers, however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified below. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.
When can an Investor submit a Bid?
When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers (including investors), however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified above. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.
What is FHA financing?
There are three main types of FHA Financing. More information may be obtained from any mortgage company familiar with FHA Guidelines for the various programs.
(1) 203(b) Regular FHA Loan - Listed as "IN"
• If the Property does not have any mandatory repairs FHA will insure the Loan hence the classification of "IN"
(2) 203((b) - Repair Escrow - Listed as "IE"
• When a property has less than $5000 in repairs to bring it up to Minimum Property Standards, FHA will insure the loan provided the repairs are completed by the Buyer or the Buyer's agent within 90 days from the date of Closing.
• It is a cost to the Buyer that the Buyer can finance and add the amount to the mortgage.
• The Lender monitors and keeps the funds in an escrow account for disbursement on completion of repairs to the Lender's satisfaction.
(3) 203(k) - Rehab Loan - Listed as "203K "
• When the property has more than $5000 in Minimum Property Standards repairs to be done.
• The Lender must obtain an Inspection report from an approved 203(k) consultant and a new appraisal.
How is the repair escrow amount determined?
The FHA appraiser lists the estimated cost of repairs needed to bring the property up to minimum FHA standards. This amount is then multiplied by 110% and this amount is listed as the repair escrow amount. Example: if repairs total 1,000.00 x 110% = 1,100.00. The Repair Escrow amount will be listed at $1,100.00.
How do I determine the mortgage amount when there is a repair escrow?
The DE Underwriter will determine the final 203(b) mortgage amount. The DE Underwriter will take into account the repair escrow amount to determine the FHA loan amount. The DE underwriter will determine this amount. Regardless of whether or not a repair escrow will be used in the purchase of a home, the lines on the Sales Contract that request the down payment amount and the secured mortgage amount should be filled in "TBD" (To Be Determined). The line associated with the length of the loan should also be filled in TBD. Please remember that the repair escrow amount needs to be filled in only if the buyer is using 203(b) repair escrow financing.
Why do I have to get a Pre-Qualification Letter before I bid?
A Pre-Qualification Letter must be obtained prior to bidding on a property. This is to avoid having to tie up the property with a transaction that is unlikely to close. The Pre-Qualification letter must be directly from the lender (NOT the mortgage broker) giving a current date and an amount of the loan that is acceptable. It should also include the name the buyer(s) whose credit report was reviewed and approved by the lender.
What is Officer/Teacher Next Door?
One of HUD's Special Sales Program under the Good Neighbor Initiatives is the Officer Next Door/Teacher Next Door (OND/TND) program. The OND/TND Programs offers HUD-owned, single family homes that are located in HUD designated Revitalization Areas will be made available to Law Enforcement Officers and Teachers at a 50 percent discount of the last listed price. When a law enforcement officer or teacher chooses to use an FHA-insured mortgage the down payment is $100. When a governmental agency of nonprofit organization is the purchaser, HUD expects that the full discount will be passed on to the law enforcement officer or teacher. Officer Next Door/Teacher Next-Door program participants are required to own and use their property as their sole residence for at least three (3) years. Participants agree to execute a second mortgage and note which will be for the amount of the discount which HUD can call at a later date if the buyer fails to re-certify. During the entire term (3 years), the buyer may NOT own ANY residential real property other than the OND/TND home. Failure to comply with this (or any OND/TND) requirement may result in the remaining balance of the second mortgage becoming immediately due and payable. The officer or teacher must submit a contract bid of 100 percent of the listing price. Winning bidder will be chosen by lottery. The 50 percent discount will be applied at closing. Teachers must be employed in the school district that they purchase a home in under the Teacher Next Door Program.
What is Firefighter - Emergency Medical Technician Next Door?
Effective November 1, 2005, HUD announced the eligibility of firefighters and emergency medical technicians to purchase HUD acquired homes located in HUD designated revitalization areas at a discount, in accordance with HUD's regulations for the Officer/Teacher Next Door (OND/TND) Sales Program. Inclusion in the OND/TND program is designed to help more firefighters and emergency responders become homeowners, and will further the goals of the OND/TND Sales Program to accelerate the revitalization of America's cities by promoting the integration of dedicated role models and mentors into the community.
