Do HUD owned homes that qualify for a $100/down payment only require a $100/down payment?
Surely there is a "catch" and I can't buy a home for only $100, right?
Do HUD owned homes need a lot of repairs? What improvements are eligible under the new Streamlined (k) program? How does the "repair escrow" work on a HUD? I really want the house, should I offer more than HUD is asking for the home? For uninsured HUDs: What does it take to qualify to purchase a HUD owned home for only $100/down? How do I know if a property I am interested in is still available?
Do HUD owned homes that qualify for a $100/down payment only require a $100/down payment?
Yes, when using FHA lending and you are buying the home as an "owner occupant" (meaning you intend to move into the home to live in it). Surely there is a "catch" and I can't buy a home for only $100, right? Correct, you can't. When making an offer on a HUD home you must come up with earnest money of $1000 on a home over $50,000 or earnest money of $500 on a home under $50,000. Your "Earnest Money" is deposited in your Broker's escrow account until the day of closing and these funds are yours to use on any un-reimbursed closing expenses and your $100 down payment. The earnest money is HUD's assurance that your are serious about the purchase and it discourages Purchaser's from walking away from a deal because this money would be lost to HUD in the event the Purchaser "changed their mind". Additionally, if you wish to have the home inspected (strongly encouraged) the expense of having the utilities turned on and the cost of the inspection is the burden of the Purchaser. Inspections cost between $300-$350. Also, HUD assesses a "re-winterization" fee of $75 between September 15th and March 15th so that after your inspection they can drain the water lines to prevent the pipes from freezing and breaking. There should be no additional out of pocket expenses (beyond the $1000 earnest money, and only a little when using $500 earnest money) if we structure your offer to reduce your out of pocket expenses. Do HUD owned homes need a lot of repairs? Some do and some don't. HUD owned homes are foreclosed properties and are like all other bank owned homes in that they vary greatly in condition. When a HUD home requires no improvements to receive an FHA loan it is considered to be "insurable". Any lender offering FHA lending should be happy to make a loan on this property to a qualified buyer. When a home needs less than $5000 in repairs, it is considered to be "insurable with escrow". This means that the repairs required by FHA can be included in the loan amount and the repairs can be completed after closing. When a home needs more than $5000 in repairs, it is considered to be FHA "unsurable". This means that the repairs required by FHA exceed $5000 and it requires a FHA Streamlined 203K loan. With this loan you are able to add between $5000 and $35,000 to your loan amount to have the home made compliant with FHA's condition requirements. Click here for allowable improvements. What improvements are eligible under the Streamlined (k) program? The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamlined (k) program includes the discretionary improvements and/or repairs shown below: · Repair/Replacement of roofs, gutters and downspouts · Repair/Replacement/upgrade of existing HVAC systems · Repair/Replacement/upgrade of plumbing and electrical systems · Repair/Replacement of flooring · Minor remodeling, such as kitchens, which does not involve structural repairs · Painting, both exterior and interior · Weatherization, including storm windows and doors, insulation, weather stripping, etc. · Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens · Accessibility improvements for persons with disabilities · Lead-based paint stabilization or abatement of lead-based paint hazards · Repair/replace/add exterior decks, patios, porches · Basement finishing and remodeling, which does not involve structural repairs · Basement waterproofing · Window and door replacements and exterior wall re-siding · Septic system and/or well repair or replacement How does the "repair escrow" work on a HUD? In order for FHA to insure the loan on a HUD owned home, the home must be in acceptable condition and pass the FHA approved appraisal/inspection provided by HUD's appraiser. If the required repairs exceed $5000 the home is considered "uninsured". Click here for more explanation. When the repairs are under $5000, FHA allows the purchaser / borrower to include the cost of repairs in their loan amount (only up to $5000). These repairs must be completed within 60 days (varies by lender) and then the lender will reimburse the purchaser/borrower for the repairs. Only the repairs required by FHA will be reimbursed and they will only reimburse from paid receipts. The lender will not allow you to complete the work for less and pocket the difference. They will reduce your loan amount by the left over escrow repair money. CAUTION: You will need to find repair people that will complete the work in advance of the lender paying them from escrow or you will need to pay them yourself in order to pass the reinspection and get the lender to disperse the repair money from escrow. I really want the house, should I offer more than HUD is asking for the home? This is a good question. When HUD initially offers a property for sale they almost always offer the property for the FHA appraised value of the home. If you offer over this amount for the property and wish to use an FHA loan; the lender will only lend up to the amount on HUD’s appraisal of the home minus your $100 down payment and you will have to come up with the difference. Numerous HUD deals are falling apart now because uninformed Purchasers are finding out after having the "winning" offer that they have to come out of pocket for the difference between their offer and the FHA appraised value provided on HUD’s appraisal. Example: The home is appraised and offered for $100,000 and the "winning" Purchaser offered $110,000. This Purchaser will need $10,100 to for the down payment of the home when using HUD’s FHA appraisal. What does it take to qualify to purchase a HUD owned home for only $100/down? You will need to qualify for a FHA loan. Most lenders offering FHA loans have a minimum credit score requirement between 600 - 620. FHA loans are offered by many financial institutions but not all financial institutions will make a loan on a HUD owned home that has a repair escrow. Our preferred lender does and you can get pre-qualified today and start looking tomorrow. Visit http://Apply.HUDDepot.com to get PRE-Qualified Online or to download an application that you can email or fax to our preferred lender. You should have an answer back in just a few hours. How do I know if a property I am interested in is still available? There are many HUD owned homes advertised that have recently gone under contract. HUD owned homes have been selling quickly and then come back on the market if the Purchaser didn't qualify so the advertisements for HUD owned homes are often not current. Because of this, it is best to go directly to the source for availability information. HUD advertises it's properties on Bidselect.com but we have set up a user-friendly site that let's you search their site directly while also offering instructions for how to use their site and how to distinguish between $100/down HUD owned homes and ones that aren't $100/down. Visit http://Search.HUDDepot.com to search HUD's database of listings |