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Buying FHA Homes

When an FHA home goes into foreclosure, title is returned to the FHA which passes it on to HUD, the Housing and Urban Development Agency which oversees the FHA.  At that point the house becomes a “HUD home” and is offered for sale. These are 1-4 unit dwellings that are initially offered to potential owners who intend to acquire a property for their principal residence.  Following a period when the offer is open only to potential owner-occupants, the sale offer is opened to any potential buyer including developers. 

Anyone with cash or with financing available can buy a HUD home.  When the properties become available for public purchase they are posted on various Internet sites that are maintained by companies under contract to HUD.   You will need a real estate broker who is registered with HUD to submit an offer on your behalf.  If the negotiated sales contract includes a broker’s commission, HUD will pay it.

Some, but not all of these properties are eligible for mortgages.  Before you purchase it is well worth while to have a thorough inspection done on the property and perhaps a walk-through with a contractor as well.  If the property is going to need repair it’s important to think about the financing that might be needed for that purpose as well.  An FHA 203k mortgage might fit your requirements perfectly.

There is a program that provides reduced prices on these prices to certain individuals.  Law enforcement personnel, teachers, firefighters and emergency medical technicians all may qualify for the Good Neighbor Next Door program.  This initiative is designed for revitalization areas in cities that need to have essential public employees live where they work.  In return for a guarantee to remain in the home for three years, purchasers working through the Good Neighbor Next Door program receive a 50% discount on the home.

There is also a program to provide unsold inventory to non-profit agencies and local governments at reduced prices.  Included in these initiatives is the opportunity for a local government to acquire a HUD property that has remained unsold for eighteen months for the sum of one dollar.