Four Things To Consider When Buying A HUD Home
A HUD home is insured by the government. The FHA loan is in danger of being foreclosed, so the Federal Housing and Urban Development pays it off. Then, the Federal Housing Department places the house on the market. And allowing you (the buyer) to purchase the foreclosed property. The primary reason home buyers get interested in HUD homes is the low market value. They do not cost as much to buy, so more people gravitate to them.
What To Consider When Looking For One of These Homes
1) Do You Want To Buy Or Invest?
Uninsured homes need more repairs. That is why investors like them. Investors want to buy them, fix them up, and then sell. An insured home is just the opposite. They have fewer repairs and are attractive to home buyers who do not have a lot of money. HUD insured homes are designed for buyers who intend to live in the property full-time. Investors can’t buy an insured HUD home unless he or she intends on living there. There are many Pros and Cons to consider when buying a foreclosed property.
- a) To buy a HUD home, the home buyer is only required to pay 20% of the mortgage. HUD pays the other 80%. That is what makes them so attractive to home buyers, especially low-income renters. The home buyer can move in once the home inspector feels the repairs are complete. Repairs on an insured home usually total less than $5,000.
- b) An uninsured HUD home is sold “as is.” In a lot of ways, they work as fixer-uppers. When buying as an investment property The investor pays for the repairs and sells it. The repairs on an uninsured home can total more than $5,000.
2) Do You Want To Occupy or Flip?
Homeowners that buy need to spend more than 50% of their time in the house. You cannot buy another home as a primary residence. You should plan on living there for at least one year or more.
3) Finding One
There are a few ways homebuyers can find a HUD home. They can access the MLS ratings or go to the official HUD real estate site. They have homes listed every day. The information is current. Nothing is outdated because once a home is sold it is taken down.
What About Financing?
A home buyer does need HUD financing to get a property. They have very strict guidelines to follow that include private financing and cash payments. They do accept cash payments, but you do need to follow their rules when you buy a home.
You should schedule a walk-through visit once you find a Realtor to work with. You walk in and take pictures of the property. The first thing to do is place a bid on a property of interest. After that, you place a deposit down.
The Deposit and Bid
The deposit is usually about 10% of the sale price. Say the property is selling for $50,000. The home buyer places a deposit of $500. The Realtor lets you know if the bid has been accepted or not. The deposit goes through once the bid has been accepted.
This information is based on current guidelines, but it is noteworthy to mention that guidelines change often. To get the best out of your HUD home purchase, we do recommend working with a HUD approved Realtor.