1. What is HUD?

HUD stands for the United States Department of Housing and Urban Development. It’s a government agency devoted to supporting affordable home ownership.

For details on the history and specifics of all available HUD programs, check out this government-sponsored HUD website.

2. What are HUD Homes?

A home can be nicknamed a “HUD home” if it was originally financed by an FHA loan, but the owner foreclosed on that loan and, as a result of that foreclosure, HUD now owns the home. HUD sells these homes, often at bargain prices, to compensate for at least some of the losses incurred.

3. Who Buys HUD Homes?

Anyone who qualifies for the loan (FHA or conventional) or who has the cash upfront can buy a HUD home. However, HUD prefers to sell to owner-occupants; that is, people who plan on using the home as their primary residence. HUD homes can also be sold to investors, both for flipping and to be used as rental properties.

4. How Can You Buy a HUD Home?

You’ll have to work with a realtor, a FSM (Field Service Manager-a contractor that oversees the physical welfare of the home including inspections and repairs), and an asset manager (another contractor hired to oversee the financial aspects of the transaction.) If you use a HUD-assigned realtor, the HUD program will usually pay for that realtor’s end of the closing costs. However, if you use your own realtor, you will have to pay the closing costs required by that realtor (the HUD program will not cover those costs.)

In most HUD home sales, two separate bidding opportunities are presented. First owner-occupants can bid for the home, then if the home is not sold during that process, another bidding opportunity is opened for investors.

5. How Can You Find a HUD home for sale?

Work with a realtor to buy a HUD home. You may want to start by researching local realtors to see if you can find one who specializes in HUD sales. You can also search online to get an idea of what is available right now.

Follow this link for an up-to-date listing of available HUD homes for sale.

6. Are There Any Special Discounts on HUD Homes?

HUD homes are usually up for sale at a significant discount already, since the home has foreclosed, the lender has been paid, and the mortgage insurance has been used to finish off the relationship with the original owner of the property. HUD homes are usually a good deal (price-wise).

However, you can get further discounts in certain situations. For example, if you are in a hardship situation -  you have been displaced from your home due to a natural disaster – you may qualify for an additional discount when buying a HUD home. You may also qualify for up to a 50% discount on a HUD home purchase if you are a public servant such as a teacher, firefighter, or a police officer and are willing to buy a HUD home in a city’s specified “revitalization” area. There are special requirements to qualify for such discounts (such as promising to live in the home for the next three years and keeping the home up to certain standards.)

7. What Are Potential HUD Home Pitfalls to Avoid?

If you buy a HUD home, you must buy it as is, without any sort of warranty. You may discover upon buying the home that there are more repairs than you anticipated. Pay close attention to the two inspections; there should be one just before you accept the HUD contract, and one again just before closing. HUD will not pay for repairs after you’ve purchased the home, so make sure you take the inspection of your HUD home seriously before you sign on the dotted line.

While HUD does not actually pay for any repairs needed on HUD properties after you’ve bought them, the government does offer financing programs with good rates for those who buy HUD homes and need to borrow money to make repairs. Check into the FHA 203k rehab loan program for details on borrowing opportunities linked to the purchase of a HUD home.

8. What About Renting a HUD Home?

If you are in a low-income bracket or are experiencing hardship, you may qualify to rent a HUD home and receive either a housing voucher or a housing subsidy. Or you may qualify to be a landlord of a HUD home. The lenders, borrowers, landlords, and renters in such a situation all work together under specific conditions outlined by the Federal Government. For more information on HUD programs aimed at assisting people experiencing hardship, check out the details listed here.

HUD Home Conclusions

HUD homes can open up fabulous home ownership opportunities at bargain prices. Buying and renovating a HUD home can also be a key part of revitalizing a community, which benefits not only you, but society as a whole. Check into HUD home opportunities near you to see if you find something that will fit your situation.