Buying and Financing HUD Homes

Simply Put We LOVE Financing HUD Homes!

HUD homes are foreclosed homes.  They are homes that the previous owner took out a FHA loan and were subsequently foreclosed on.  HUD/FHA then takes those homes and resells them.  Not only are HUD homes listed for sale on the local MLS but they are also listed for sale at hudhomestore.com.   While many real estate agents and lenders run from them, we run to them!  Yes, it is true, HUD homes can pose there own set of challenges when it comes to trying to finance one, but they also have there own set of unique financing options.  The following is a presentation on HUD homes.  We dive into the nitty gritty.  We cover problems that come up and the ways to solve those problems.    If you are a buyer looking to finance a HUD home you can apply here.  Realtors with questions feel free to call Jeremy at (269) 488-9494.

** note this video was done as a training to realtors and gets into all the boring details about HUD homes.  Its meant for education not entertainment!

Problems and Solutions for HUD Home Financing

Buying a HUD home can be a real pain. However, having the right financing in place makes all the difference and can solve most of the issues that come up.  This  HUD program reference guide can help explain how the different loan programs work and is specific to HUD homes.   Here are some of the common issues buyers face when diving into this type of transaction.

Appraiser Required Repairs

Like any transaction the lender is going to send an appraiser out to the property.  If the appraiser feels there are any health and safety issues they will require those items to be corrected prior to closing.   Here is a sample list of required repairs.   HUD (the seller) wont fix ANYTHING prior to closing and they will not let anyone in the home to fix anything.  However, there are a number of ways to resolve appraiser required repairs.  One of the most common ways that is available on all the loan programs (conventional, FHA, RD, and VA) is a renovation loan.  The renovation loan allows for required repairs and items borrowers want to update; to be financed into the loan and completed after closing.  It’s a great way to handle the items that come up.

For home buyers not wanting to do a full-on renovation loan, another way to take care of things is with a repair escrow.  The difference is that the repair escrow only allows for appraiser required repairs that can be completed within 2 weeks of closing.  For the most part, borrowers must fund the repair escrow with out-of-pocket money.  The exception to this is a program unique to HUD homes, the FHA 203b with a repair escrow.  With this special program up to 10,000 worth of appraiser required repairs can be financed into the FHA loan.

Down Payment

Maybe people think the only way they can buy a HUD home is with a 20% down conventional loan.  That’s incorrect.  Here are some of the low down payment options available for HUD homes.

  • Conventional  – Minimum 3% down
  • Rural Development  – Zero down
  • VA – Zero Down
  • FHA 203b, 203b with a repair escrow, 203k renovation loan – special financing available with as little as $100 down
  • MSHDA Down Payment Assistance  – 1% down – note we can not accommodate appraiser required repairs with this program.
Seller Paid Closing Costs

YES you can ask for assistance from HUD (the seller) for closing costs.  HUD will pay up to 3% towards closing costs for buyers.  You just need to ask when you write the offer.

Lead Based Paint

For buyers obtaining FHA financing, HUD will test for lead based paint.  If the house fails the LBP test and the cost is under $4,000 HUD will remediate the lead.  If the cost is more than $4,000 no problem. .  . we will simply switch the loan over to an FHA 203k renovation loan and remediate the lead after closing.  HUD in that case will contribute $4,000 towards the cost of the remediation.

 

As you can see with the programs Amerifirst Home Mortgage offers we have lots of options to finance HUD homes.   We can solve most of the problems that come up.  HUD homes are not difficult to finance and they can be a great way for home buyers to acquire an affordable home with little to no money down.  Don’t hesitate to reach out with any questions you might have.

Latest Blog Post

November Lunch and Learn / Webinar: Low Down Payment Options For Home Buyers

Money, Money, Money, Money

One of the biggest myths out there is that you need a bunch of money to buy a house.  That’s simply not true.  There are a number of No and Low down payment options for home buyers.  On top of that you don’t have to be a first time home buyer to access many of those programs.    During our next lunch and learn we will cover all the different options out there for buyers looking to minimize their down payment.  Over the last couple years its been harder to get a lot of these types of offers accepted.  However, with the market going back to a much more “normal” state it’s not nearly as hard as it was just a few short months ago.  This is the perfect time for Realtors to reconnect with their past customers and get back out there looking.   Come check out this lunch and learn and get a refresh course on low down payment options for buyers!

Hot Topics We Will Cover

Here is a list of some of the things we will cover during the event:

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