HUD Home Financing Options
Understanding HUD Home Financing Options: A Comprehensive Guide
Buying a home is an exhilarating yet intricate process. For many, the dream of homeownership can seem daunting due to financial constraints. However, the U.S. Department of Housing and Urban Development (HUD) offers various financing options designed to assist individuals in purchasing HUD-owned homes, making the dream of owning a home more achievable. It is important to have a lender that is up to the challenge of navigating HUD home financing.
These properties are foreclosed homes. The previous owner had taken out an FHA mortgage and didn’t make the payments. Subsequently, these homes were foreclosed on. Often, these homes require repairs, and the utilities can’t be turned on. Frankly, HUD (the seller) doesn’t care – the properties are sold as-is, and HUD will not make any repairs to the home. That’s where things can get hairy if the lender is not equipped to navigate the process.
If you are currently working on financing one of these properties and are having any issues, call us at (269) 360-7109. We will help you through the process! Better yet, get preapproval from us before making an offer, and it will be smooth sailing from the get-go. We LOVE HUD homes because there are some excellent loan programs available to help buyers make it to the closing table.
Mortgage Loan Program Options For HUD Homes
The biggest concern for home buyers is typically the down payment and repair issues. Below is a chart of financing options, the down payment requirements, and how repairs can be handled.
| Loan Program | Minimum Down | Repairs to be completed after closing |
| FHA 203b | $100 | Borrower funded escrow up to $10,000 |
| FHA 203b with a Repair Escrow | $100 | Up to $10,000 rolled into the loan |
| FHA 203k | $100 | Repairs can be rolled into the loan – no limit |
| Conventional | 3% | Borrower funded escrow up to $10,000 |
| Conventional Renovation Loan | 3% | Repairs can be rolled into the loan – no limit |
| USDA Rural Development | 0% | Borrower funded escrow up to $10,000 |
| MSHDA Down Payment Assistance | 1% | No post closing repairs must pass appraisal |
| VA Veterans | 0% | Repairs can be rolled into the loan – $50,000 limit |
So, you can see there are plenty of ways to handle repairs and keep the down payment to a minimum. There is really no reason these should fall apart after closing.
Facts about HUD homes
- HUD will pay up to 3% towards the buyer’s closing costs. This must be requested at the initial bid.
- If the buyer is using FHA financing, HUD will conduct a lead-based paint test on the home. NOT a big deal. If the house tests positive, there are options.
- When we talk about renovation above, the work is all done AFTER closing. HUD will not allow you to do any work on the home prior to closing. More info on the renovation loan process here.
- FHA loans typically require 3.5% down. Yes, you read that correctly. However, for HUD homes, there is a special financing option where the buyer can put down just $100!
- Utilities – they don’t have to be on. Some of the programs may require an additional inspection in regards to the utilities, but the deal should never fall apart because one of the utilities can’t be turned on.
The Bottom Line
If you call 10 different lenders, many of them are going to tell you that some of the things mentioned above are not possible. We know how to get it done. If you are a homebuyer in the process of purchasing a HUD home or a Realtor having issues with a lender getting one of these closed, get with us. We have years of experience dealing with these types of purchases and have all the different loan program options for buyers. We will help you get to the closing table. To start the process, call us at (269) 360-7109 or jump online and fill out the loan application.
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S.O.S. SAVE OUR SALE: WHAT TO DO WHEN YOUR LENDER STALLS WEEKS BEFORE CLOSING!
Did your mortgage lender suddenly go radio silent, request the same bank statement for the fourth time, or drop a last-minute loan denial right before your scheduled closing date?
Yesterday, a panicked real estate agent called my office from Portage. Their buyer had been under contract for three weeks on a home near Milwood. The closing date sat just nine days away.
Out of nowhere, the buyer’s out-of-state call-center lender issued a denial letter. The call-center underwriter miscalculated self-employment write-offs, panicked over an unpermitted porch repair on the appraisal, and threw the entire transaction into the trash can.