How to Buy a HUD Foreclosure

If you are in the market for an affordable home and don't wish to take on a sizable mortgage, buying a HUD home can be for you. Buying a home from the US Department of Housing and Urban Development (HUD) comes with several advantages. While most homes HUD has on the market are foreclosures in need of repair, many are listed for well under market value and smart alternatives for borrowers tight on funds. The agency also offers special sales prices for those in community service-related fields such as teachers, firefighters, police officers and medical personnel. Buying a house from HUD is fairly straightforward, however, there are some things to consider and familiarize yourself with.

Things You'll Need

• List of HUD property listings
• Proof of funds to purchase

Instructions

1. Begin searching for available HUD homes listed in your area by contacting the US Department of Housing and Urban Development. The agency lists its available homes by city and state. The list is updated daily, so check it often.

2. Contact local real estate offices to find an agent who is approved by HUD to market its listings. Some agents are highly skilled in selling foreclosed real estate. Work with only with a veteran in the HUD/foreclosure game.

3. Secure funds to purchase. You will need to have your source of funds lined up before you begin walking through homes and bidding on listings. If you are buying with cash, have your bank statements handy. If you plan to finance, meet with a loan officer and get pre-qualified as soon as you decide to buy a HUD home. Give yourself at least 30 to 45 days to complete the process from application to closing. If you are unsure which lender to use, contact HUD and a representative will provide you with a list of approved lenders in your market.

4. Walk through several listings. The key to buying HUD homes is bidding on the ones that need the least amount of repairs. See as many homes as you can and compare what each will cost you in initial repairs and future maintenance.

5. Begin the bidding process. All HUD properties are only open for bids at specific times (bid periods). When you are ready to make an offer, your agent will contact HUD and submit a sealed bid on your behalf. HUD only deals with approved real estate agents. When bidding, keep in mind HUD almost always chooses the highest bidders, especially those who come to the table with cash offers. Allow your agent to direct you so you don't bid yourself out of the market or too low.

6. Require a home inspection to be done on the properties you win before you close on them. Do not sign an offer notice until the inspection is done and you've reviewed it with your agent and loan officer.

Tips & Warnings

• Always budget wisely for repairs when buying HUD homes.

References

• Frank Giammarese, Loan Officer, First Step Mortgage Group, Rockford, Illinois
• HUD.gov: Real Estate Available For Sale