HUD Homes

HUD homes...what?! HUD stands for Housing and Urban Development; it is one of the cabinets of our government. This department has many duties in dealing with our communities and neighborhoods, but one particular job is when HUD occasionally takes possession of homes when the bank it insures forecloses. Such properties are then generally sold on the open market. Buyers of HUD homes as their primary residences who make a full-price offer to HUD using FHA-insured mortgage financing receive seller concessions from HUD enabling them to use only $100 down payment. That is all one needs, is $100 down payment, most of the closing costs are covered by HUD and you have a home.

There are two catches, 1) when these homes come on the market, they go fast, find a realtor in your area that specializes in these homes. 2) Usually these homes are in a "beat up" condition, i.e. ripped out carpet, holes in the wall, missing appliances, etc. (This happens because people blame the bank for them being kicked out of their home and to get back at them, they trash the home.) But banks have a way to take care of that problem. There are two programs out there that allow you to roll in the cost of fixing up the home into the loan for the home. One is called a Escrow Hold Back. An escrow hold back allows up to $15,000 worth of work to be done on a home, but has to be completed within 10 to 15 business days. The other program is a FHA 203 (k) loan. This loan allows up to 35,000 to be done on a home, within in 6 months. The costs of this type of loan are higher though and very few lenders offer this program.

HUD homes can be a deal and can be a good starter home for first time home buyers. The money saved from putting only $100 down, will allow you to invest in the home and increase its value.