How
can I buy a HUD Home?
Anyone
can purchase a HUD Home as long as you have
the cash to purchase the home or you can qualify
for a loan to purchase it. HUD Homes are sold
through a bid process and you will need a
HUD-approved real estate agent to assist you
with that bid process. HUD will even pay that
real estate agent's fee.
HUD
Homes are sold "as-is," without
warranty. That means that HUD will not pay
to correct any problems. But even if a HUD
Home needs fixing up - and not all of them
do - it can be a real bargain! For example,
HUD's asking price on the home will reflect
the fact that the buyer will have to invest
money to make improvements. HUD might offer
special incentives such as an allowance
to upgrade the property, a moving expense
allowance, or a bonus for closing the sale
early. And keep in mind that on most sales,
the buyer can request HUD to pay all or
a portion of the financing and closing costs.
Your real estate agent will have details.
We encourage you to get the home professionally
inspected before you make an offer so you
will know what repairs you may have to make
BEFORE you submit your bid.
Start
your HUD Home buying process by finding
a participating real estate agent. Your
real estate agent must submit your bid for
you. Normally, HUD Homes are sold in an
"Offer Period." At the end of
the Offer Period, all offers are opened
and, basically, the highest reasonable bid
is accepted. If the home isn't sold in the
initial Offer Period, you can submit a bid
until the home is sold. Bids can be submitted
any day of the week, including weekends
and holidays. They will be opened the next
business day. If your bid is acceptable
to HUD, your real estate agent will be notified,
usually within 48 hours. You'll be given
a settlement date, normally within 30-60
days, by which you need to arrange financing
and close the sale.
How can FHA help me buy a home?
FHA insured mortgages offer many
benefits and protections that only come with
FHA:
Easier
to Qualify: Because FHA insures your mortgage,
lenders may be more willing to give you
loan terms that make it easier for you to
qualify.
Less
than Perfect Credit: You don't have to have
a perfect credit score to get an FHA mortgage.
In fact, even if you have had credit problems,
such as a bankruptcy, it's easier for you
to qualify for an FHA loan than a conventional
loan.
Low
Down Payment: FHA loans have a low 3% downpayment
and that money can come from a family member,
employer or charitable organization as a
gift. Other loan programs don't allow this.
Costs
Less: FHA loans have competitive interest
rates because the Federal government insures
the loans. Always compare an FHA loan with
other loan types.
Helps
You Keep Your Home: The FHA has been around
since 1934 and will continue to be here
to protect you. Should you encounter hard
times after buying your home, FHA has many
options to help you keep you in your home
and avoid foreclosure.
FHA
does not provide direct financing nor does
it set the interest rates on the mortgages
it insures. For the best interest rate and
terms on a mortgage, you should compare
mortgages from several different lenders.
In order to initiate the loan application
process, please contact an FHA approved
lender.
An
FHA insured mortgage may be used to purchase
or refinance a new or existing 1-4 family
home, a condominium unit or a manufactured
housing unit (provided the manufactured
housing unit is on a permanent foundation).
What are the advantages of refinancing
to a fixed rate FHA mortgage?
There are significant advantages to refinancing
to an FHA mortgage with a fixed interest rate,
particularly if you currently have a higher
cost mortgage or have a mortgage that has
an adjustable or a variable interest rate,
optional payments or interest only payments
that will increase in the near future. Borrowers
with adjustable or variable interest rate
mortgages or interest only payment mortgages
often encounter much higher monthly payments
("payment shock") after having the
mortgage for just a few years.
FHA
fixed interest rate mortgages cost less.
FHA loans have competitive interest rates
because the Federal government insures the
loan. A fixed interest rate FHA loan will
have a low interest rate compared to a subprime
loan and the FHA loan will have fixed payments
of principal and interest compared to an
adjustable rate or variable interest rate
mortgage or a mortgage with optional or
variable payments.
You
don't have to have perfect credit to get
an FHA fixed rate mortgage. Even if you
have had credit problems, such as a bankruptcy,
you may still qualify for an FHA mortgage.
Should you encounter hard times after refinancing
your home, FHA has programs to help you
keep you in your home and avoid foreclosure.
FHA
does not provide direct financing nor does
it set the interest rates on the mortgages
it insures. For the best interest rate and
terms on a mortgage, you should compare
mortgages from several different lenders.
An
FHA fixed interest rate mortgage may be
used to refinance a new or existing 1-4
family home, a condominium unit or a manufactured
housing unit (provided the manufactured
housing unit is on a permanent foundation).
What are the basic eligibility requirements
for FHA financing?
FHA insures mortgages made by approved
lenders to individuals and non-profit and
government agencies that are approved to participate
in HUD's programs; HUD does not loan money
to homebuyers.
Generally,
to be eligible for an FHA loan, you must
have a valid social security number and
have lawful residency in the United States
and be of a legal age to sign on a mortgage
in your state. Lenders will verify income,
assets, liabilities, and credit history
for all parties on the loan. With an FHA
loan, you cannot take an ownership interest
in a property without qualifying for the
loan.
FHA's
mortgage programs do not typically have
maximum income limits for qualifying, although
you must have sufficient income to qualify
for the mortgage payment and other debts.
Income limits may be present when qualifying
for down payment assistance or other secondary
financing programs (including those funded
by HUD) that may be used in conjunction
with an FHA loan.
FHA
does not have minimum credit score requirements,
although past credit performance serves
as the most useful guide in determining
a borrower's attitude toward credit obligations
and predicting a borrower's future actions.
Using FHA's guidelines, lenders will make
a credit determination based on the merits
of each case. To find out if you qualify,
and how much you can borrow based on your
income and debts, you should contact a HUD-approved
lender.
What is the FHA Secure refinance program?
Under the new "FHASecure"
refinance program, FHA will allow families
with acceptable credit histories who had been
making timely mortgage payments before the
interest rate on their adjustable rate mortgages
reset-but are now in default-to qualify for
refinancing to an FHA mortgage.
The
basic requirements of the FHASecure program
are:
*The
mortgage being refinanced must be a non-FHA
Adjustable Rate Mortgage (ARM) and the interest
rate has reset.
*The
homeowner is now delinquent in making payments
on the mortgage after the reset.
*
The homeowner's payment history must show
that, prior to the reset of the interest
rate on the mortgage, the homeowner was
current in making the monthly mortgage payments,
i.e., the homeowner's mortgage payment history
during the 6 months prior to the interest
rate reset showed no instances of making
mortgage payments outside the month due.
*
The homeowner has sufficient income to qualify
for an FHA mortgage.
If
there is sufficient equity in the home,
FHA will allow missed mortgage payments
to be included in the FHA refinance mortgage,
if the arrearages arose after the interest
rate reset or the homeowner may be able
to use a second mortgage to finance the
missed payments.
How can FHA help me if I am behind in my mortgage
payments?
FHA insures your mortgage; therefore,
your lender has to follow FHA servicing guidelines
and regulations. You should first contact
your lender’s Loss Mitigation Division
to seek a workout solution, but if your lender
is non-responsive, then you will need to contact
FHA’s National Servicing Center. All
requests for information or clarification
of policy on servicing related issues should
be directed to the FHA National Servicing
Center (NSC).
How does HUD define a first time homebuyer?
FHA defines a first-time homebuyer
(FTHB) as an individual who has had no ownership
in a principal residence during the 3-year
period ending on the date of purchase (closing
date) of the property. A FTHB includes any
individual that has only owned with a former
spouse while married. A FTHB would also include
an individual who has only owned a principal
residence not permanently affixed to a permanent
foundation, or a property that was not in
compliance with State, local, or model building
codes and cannot be brought into compliance
for less than the cost of constructing a permanent
structure.
Can
I use FHA financing to acquire a second
home?
A secondary residence is a property the
borrower occupies in addition to his or
her principal residence. Secondary residences
are only permitted when the appropriate
Home Ownership Center (HOC) agrees that
an undue hardship exists, meaning that affordable
rental housing that meets the needs of the
family is not available for lease in the
area or within reasonable commuting distance
to work, and the maximum loan amount is
85 percent of the lesser of the appraised
value or sales price. Direct Endorsement
(DE) lenders are not authorized to grant
hardship exceptions. Any
request for a hardship exception must be
submitted by the lender in writing to the
appropriate HOC. HOC jurisdictions are listed
in Appendix I of HUD Handbook 4155.1 REV-5.
A borrower may have only one secondary residence
at any time. All the following conditions
must be met for secondary residences:
A.
The secondary residence must not be a vacation
home or otherwise used primarily for recreational
purposes; and
B.
The borrower must obtain the secondary residence
because of seasonal employment, employment
relocation, or other circumstances not related
to recreational use of the residence; and
C.
There must be a demonstrated lack of affordable
rental housing meeting the needs of the
borrower in the area or within a reasonable
commuting distance of the borrower's employment.
Documentation to support this must include:
1.
A satisfactory explanation from the borrower
of the need for a secondary residence and
the lack of available rental housing in
the area that meets the need.
2.
Written evidence from local real estate
professionals who verify a lack of acceptable
rental housing in the area.
What
is the Low/Moderate Income Families Program?
The Section 221(d)(2) Low/Mod Income Families
program was designed to increase homeownership
opportunities for low- and moderate-income
families however, this particular program
was eliminated in February 2001.
The
program currently serving low and moderate
income families, is the basic FHA loan,
Section 203(b). This program requires a
low down payment of 3 percent and less stringent
underwriting than conventional mortgages.
For more information on FHA insured mortgages,
contact an FHA approved lender.
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