HUD homes were not that much of a hot topic in 2006 when the housing boom peaked. However, a housing bust followed making the HUD program a household name. A HUD home is basically a program by the U.S Department of Housing and Urban Development.
The government acquires HUD homes owing to foreclosures on FHA-insured mortgages. HUD aims at selling these homes to regain the monetary loss. During the recession, many people lost their homes giving foreclosure a negative connotation. However, purchasing a HUD home can be a great deal and an awesome experience. It helps to understand the HUD program and the foreclosure process.
Many people who want to buy HUD homes are not usually familiar with the entire concept, so do not feel alone. The first thing you need to do is explore the available official information on these homes. Remember that it is a government program and it has government rules. There is, however, a lot of information on the department’s website and it features frequently asked questions. In addition, you will find state-specific information and tips on inspections and loans.
At times, investors consider HUD homes gold mines. They see a huge potential for profit in flipping or renting them out. This means that you will be competing with seasoned investors who have access to capital. According to the law, when a home first hits the market, HUD does not accept any bids within the first 30 days.
You will find HUD homes listed on several realty sites like Re/Max Holdings Inc. and Trulia Inc. The most updated and comprehensive site is the government-run one, hudhomestore.com. If you are thinking about involving a realtor, they should be registered with HUD; otherwise, they cannot represent you. It is very important to buy a property with feasible interest rates and mortgage payments. There are online mortgage calculators that can help you figure out how much monthly mortgage you can afford to pay and any other factors that have an influence on your purchase. Window shopping is okay but secure financing in time.
Many buyers have lost their ideal homes to other buyers because of delayed loan approval. When you talk to mortgage lenders, make sure you are thoroughly informed. The two best options include the 203(K) rehab and renovation loan and the $100 down payment program. Read everything you can about the home’s history such as recent tax assessments, average sale price of similar homes, and sales history.
In your research do not neglect addendums to the property. There is a lot of legally mandated information that you cannot ignore—for instance, your dream home was probably a meth lab. There are states that require a seller, by law, to inform a buyer whether or not the property was used in production of meth. If the state you are shopping in does not have that requirement, do your own air quality audit. If a home was used as a meth lab, getting an FHA loan might be difficult. Make sure you complete the inspection before you make an offer.