Buying a new home is a big decision in anyone’s life, and it calls for a thorough approach. As the buyer, you need to gather relevant information about all details concerning your purchase. You have probably already searched for available real estate possibilities, but before you make your final decision, you should take HUD homes under consideration. The U.S. Department of Housing and Urban Development (HUD) is offering to sell foreclosure properties which were credited with FHA mortgages. These 1-4 unit houses are now back on the market since HUD is trying to minimize their losses. If you are lucky, you may get yourself a sweet deal with the government and get a great home for a discount price.
Let’s get real:
These houses are not just perfect and cheap, and that is the reason why you should be highly vigilant when it comes to picking the right one. Before you sign anything, you should be aware that there may be a lot of issues to address.
Prices are not as low as you may think:
Buying a house will most definitely cost you a lot regardless of the option you have chosen. To get the most affordable house in a good condition, you will need to do online research, which should be easy with one of the many available tools. One useful online tool is the mortgage calculator, which can be found here.
Open your eyes widely:
Even if you have found a perfectly priced house, you should know that they are sold “as they are.” This means that these properties might have waited for you for several years, and some major fixes may be necessary. HUD is not responsible for the possible defects, and they will not pay for the repairs. This issue can be prevented if you have done a previous visual home inspection. In case you choose to buy a house that needs reconstruction, you may apply for an FHA 203(k) Rehabilitation Loan. According to HUD statistics, this program will allow up to $35,000 to be added to the mortgage which you can spend on upgrading and improving the house. To get a good and professional evaluation, you will need to consult with the home inspector or an appraiser from FHA. Their reports will be used in the process. The same FHA loan may also cover the acquisition of the property.
Team up with professionals:
Everything should be a lot easier if you have support. As mentioned, you will need a home inspector to take a close look at the state the house is in. After that, you may need to consult one of the Management and Marketing contractors available in your area. They will give you the best information regarding available HUD homes. Last but not least, you will need to find the Real Estate agent of your choice. It does not matter that you are not buying a house from a person; you will need a good broker to make an official offer and seal the deal.
Once you have had a chance to take a look at all the possible issues and challenges, let’s talk about the upsides of buying a HUD home.
The abundance of possibilities:
Buying a HUD home can be a pleasant experience since it can be very easy to find your dream house, thanks to a significant amount of foreclosure properties. Using online search tools will make this process even faster and more enjoyable.
Look around the neighborhood:
Since HUD homes are numerous in every single state, there is a good chance that someone in your area decided to move, and if you are quick, you will get the opportunity to purchase an affordable house in exceptional condition.
Thirty days of head-start:
You as a bidder have one month of advantage against investors since the government made sure not to give them the opportunity to join the competition over this period. Once you have found your dream house, you can rest assured you will not be competing with big fish.
There is a discount you can negotiate while bidding for the HUD home. HUD may save you $350-$900 by paying the escrow fee and covering up to 3% of the closing costs. If you are a low or mid-income buyer, make sure to ask for these perks.
Eric Lawrence Frazier, MBA
President and CEO
NMLS 461807 CAL BRE 01143484