How to Buy a HUD Home in Foreclosure
Finding a HUD foreclosure that suits your needs as a homeowner or as an investor is like hitting the jackpot. HUD foreclosures are especially good for first-time homebuyers. HUD homes often need a little work like new paint and carpet, but they are well worth the effort.
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Instructions
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Begin the process by having a mortgage agent conduct a credit preapproval. As of April 2009, a credit score of at least 620 to qualify to buy a HUD home.
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Call an agent who specializes in purchasing HUD homes. He will be able to guide you through the buying process. Let the agent know your price range and if you are looking for a property to live in or as an investment. HUD gives priority to owner occupants over investors.
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View properties with the agent, decide on the HUD home you wish to buy and sign a bid contract. This contract must be signed before placing a bid on a property. When you sign the contract, HUD requires earnest money of at least $1,000 for properties more than $50,000 and $500 in earnest money for properties less than $50,000. Earnest money must be in certified funds only.
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Have your HUD agent put in a bid on the property. Remember that other people will be bidding on the same property. Carol Clark, a HUD specialist in Atlanta, Georgia says "You only have one shot on each property, so bid as high as you can and still feel comfortable. Never let someone push you into more than you know you can afford."
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If you win the bid, contact the mortgage agent to proceed with your loan process. You must have a final approval from a mortgage agent before HUD will issue you a closing date. If you lose the bid, you can either have the earnest money returned, or you can use the funds to place another bid.
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Tips & Warnings
If your credit is low because of bankruptcy, a high debt ratio or repossessions, talk with a mortgage agent on ways to raise it. Sometimes it will only take a few months to repair credit and be able to be approved to buy a HUD home.
Not all HUD foreclosures are insured. Ask the agent if the HUD foreclosure you are interested in is an insured property.
