How to Buy a HUD Foreclosed Home
HUD homes are houses that were originally financed using an FHA mortgage. HUD gains possession of these homes when the owner defaults on his mortgage. HUD-possessed homes are first offered for sale to owner-occupants and then made available to investors. Although HUD lists the homes at fair market value, they often accept offers at below-market prices. This makes HUD homes attractive to bargain seekers. The process to purchase a HUD home is not unlike purchasing any other home, although there are some pitfalls that a potential buyer should be aware of.
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Instructions
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Pre-qualify for home financing before searching or making an offer on a HUD home. Contact your bank or other lender and ask about conventional financing, or ask whether they offer FHA financing. HUD-insured FHA 203(b) and FHA 203(k) mortgages are convenient for purchasing HUD homes. The 203(k) loan is a single mortgage that allows for purchase and rehab of a new home. If your bank does not work with these programs, search the HUD Web site for lenders who do and get pre-approved through one of them.
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Locate a HUD home in your community. Go to the HUD Web site, highlight "Topic Areas" in the top menu and click on "Homes for Sale." Under the section titled "Single Family Homes for Sale," click on "From HUD." Click the name of your state, or click "Northern" or "Southern" under California. You will arrive at the Web site for the Managing and Marketing (M&M) Director for your region. Enter specific search criteria into your M&M's search box. Select your county or city, home size and price range. Then click "Search" for a list of HUD homes in your area.
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Review the list of homes that match your search criteria. Click on the address link of any home that interests you. Check the bid deadline for the home and read the property condition report. Review the eligibility list to ensure that you qualify to purchase the property.
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Locate a HUD-certified real estate broker in your area. Search your M&M Contractor's Web site for a list of registered brokers. Contact a broker with whom you wish to work and tell him you would like to submit a bid on a HUD property. Meet with the broker and complete a purchase contract. Specify your bid price and other conditions of your offer. Submit your contract and earnest money and wait for a reply letting you know that your offer has been accepted.
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Schedule a professional inspection of the property immediately once your offer is accepted and escrow has been opened. Ask your broker to recommend a licensed home inspector. Request a full review of the structure, plumbing, wiring, roof and overall condition of the home. HUD homes are often neglected or damaged when the previous owner leaves, and HUD usually sells the homes in as-is condition. Get a full report from your home inspector and be aware of any possible hazards or repairs that will need to be done.
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Follow up with your bank and give them a copy of the purchase contract. Provide them with all the required documentation to complete the loan package. Order a title search and purchase title insurance during the escrow process. Escrow usually takes several weeks and will require frequent contact with your bank, broker, and title agency or attorney. Be patient and work quickly with everyone involved to close escrow by the date listed on your purchase contract.
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- Photo Credit new home image by steven Husk from Fotolia.com
