HUD Loan and Home Buying Tips

2008-01-02 15:15:13

( Financial )



What is a HUD Home?

HUD stands for the Housing and Urban Development Department of the US government, a government agency that assists Americans in finding affordable homes.

HUD homes are available in different communities around the country. Some of these homes were also HUD mortgages that the Federal Housing Authority has foreclosed, hence the HUD is more than eager to sell off the properties.

Advantages of HUD Home Buying

Homes for sale under the HUD loan and homebuying program are available through the HUD website or the local multiple listing service.

You definitely need to get the services of a real estate agent as required by HUD. Many local realtors do sell HUD homes and can easily direct you towards some great deals in the vicinity.

HUD homes are sold on as is-where is basis and at fair market value, and this is why many of them are quite cheap. Even if the property is a fixer-upper, you can most likely get it fixed to your specifications with less money than you would have expected.

In fact, there's a special HUD loan program called the 203k which is primarily meant to address the need to fix up a HUD home. While this HUD loan program is available only in select areas, you may want to check with your agent as to whether there are any 203k eligible homes in the area you want to buy your home.

When you buy a HUD home, you don't meet with the seller the way you do with independently sold homes. Instead, you write a bid for the home of your choice and wait to see if HUD will approve it. Usually, the person who makes the highest bid will be awarded the HUD home.

You don't have to worry about the broker's commission, since the HUD or homeowner will take care of it.

Different Types of HUD Loans

There are no direct HUD loans, but you can course the loans through lending institutions. You can choose to have the conventional fixed or adjustable rate mortgage offered by lending institutions. These generally require a minimum down payment of 20 percent.

If you cannot afford the down payment requirement, you can opt for the FHA-insured mortgage. You have to meet certain qualifications for this type of loan, but you don't need to be a first-time home buyer.

Another alternative is to use a VA loan if you're a qualified veteran of the US Armed Forces.

Finally, you may want to consider assuming the existing loan from the previous owner of the property. This may actually be a good deal, especially if the loan terms are very affordable. Rather than go through the tedious process of foreclosing or liquidating the existing loan, lenders are usually quite accommodating about the idea of allowing you to assume the loan. You should verify if loan assumption is possible for the particular property you want.


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