What is a HUD home?
If a loan that is insured by the Federal Housing Administration (FHA) goes into default, the lender must take steps to collect on the loan. This may result in the lender taking possession of the Real Estate Collateral. If this occurs, the lender may submit a claim against the FHA insurance fund and convey ownership of the property to HUD. HUD in turn sells the property, as quickly as possible, at market value.
Who Can Buy a HUD Repo?
Any buyer that can secure a loan to purchase real estate, or can pay cash, is eligible to purchase a HUD home. Purchases MUST use a broker or agent who is registered with HUD to submit a bid on a property. Purchases must also have a pre-qualification letter from a lender or proof of cash funds in the amount of, or greater than, the property they are purchasing.
IMPORTANT PROGRAM HIGHLIGHTS:
- HUD has an “as-is” policy
- There are 3 different financing categories for HUD homes:
- IN-insurable-203(b) - Properties listed as IN appear to qualify for FHA 203(b) financing. There should not be any MPR (minimum property requirement) repairs necessary.
- IE-insurable with Escrow-203(b) Repair Escrow - Properties listed IE are eligible for FHA financing with repairs to be completed by the purchasers after the close of escrow. These repairs must be MPR repairs totally less than $5,000. MPR categories include: roof, structural, and mechanical systems, such as plumbing, electric and heating. The cost of repairs is NOT paid by HUD, however the buyer may finance the repair escrow amount in their mortgage. Repair escrow only applied to FHA financing - not cash or conventional financing.
- UN-insurable - conventional, cash or 203(k) financing - Properties listed as UI generally are in need of extensive repairs and are usually purchased with cash or conventional financing. The only type of FHA financing they may qualify for is FHA 203(k) loan. 203k FHA is a rehabilitation loan for owner occupants purchasing properties that have offer $5,000 worth of MPR repairs. Not all US properties will qualify for FHA 203k financing.
- Only one owner occupant bid at a time
- Investor bids are not accepted until at least 10 days after the property was listed. This gives Owner Occupied Purchases first opportunity to buy the home.
- HUD waives down payment requirement on HUD REO’s. Buyer only has to come to table with $100.
HUD homes can be found on the local MLS (Multiple Listing Service) search. Making an offer involves an electronic bidding process. Contact Becky Wyatt, Realtor with HomeSmart (480-383-9209) for more information about available HUD homes. Or, click to search yourself with the MLS button to the right.
Information provided by Ed and Barbara Heiser - Phoenix area Mortgage Banker/Broker with AmeriFirst Financial. Office: 480-682-6628
Information current as of date posted. Deemed reliable but not guaranteed.