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 FHASecure 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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