If you’re in the market for a mortgage, you may have heard the term HUD. If you’re wondering how it relates to buying a home, here’s a simple explanation.

The Department of Housing and Urban Development (HUD)

Originally formed in the 1960s to fight poverty, today’s HUD is the federal agency responsible for national housing policy and special programs that address America’s housing needs.

The agency’s primary program is to offer mortgage and loan insurance through the Federal Housing Administration (FHA). FHA-backed loans help buyers who do not qualify for a conventional mortgage to be able to purchase a home.

HUD is also involved in providing:

• Community development grants
• Support for affordable housing projects
• Rental assistance and subsidized housing
• Fair housing education and enforcement

What is a HUD home?

A HUD home is a property that was purchased with an FHA-backed loan but then the buyers defaulted on the mortgage and had their home seized by HUD. A HUD home is similar to the properties banks sell at foreclosure auctions, except instead of the home being seized by a lender, it’s taken over by the federal government. To make part of their money back, HUD sells these homes to the general public.

Buying a HUD home

Anyone can purchase a HUD home, although owner-occupant buyers are given first preference over investors, as long as they live in the home for at least one year and at least two years have passed since the purchase of another HUD home. HUD homes are often priced slightly below market value to encourage a quick sale. However, it’s important to note that HUD homes are sold “as is.” There is no inspection or negotiation process where you can ask for repairs or price adjustments. HUD homes are not listed on the MLS. You can only find them at hudhomestore.com.

HUD buying programs

To encourage buyers to purchase HUD homes, several special incentives are available. Some of the programs include:

• Vouchers for low-income families to receive a monthly stipend to lower their mortgage payments
• Discounted purchase price for public servants to buy in revitalization areas through the Good Neighbor Next Door Program
• 30% off for nonprofit organizations
• $100 Down Program for qualified owner-occupant buyers

Financing a HUD home

HUD homes can be financed just like a regular home. If you find a HUD home you’d like to buy, give Lenderment a call and we can help you find the right financing solution to suit your unique circumstances.

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