Homebuyers who want to take on renovation projects when buying a residential property choose HUD homes. The US Department of Housing and Urban Development offers assistance for property buyers who want to buy a home that requires repairs. The programs work with government and private lenders to help buyers purchase foreclosed properties that were damaged by previous owners.
Reviewing Foreclosures Available Through the HUD Program
The HUD programs work closely with the US Department of Agriculture to provide mortgage home loans for helping families purchase homes. The HUD homes are foreclosures that have at least $5,000 worth of property damage. The programs allow the buyers to purchase the homes and renovate the properties and bring the homes back up to code. The HUD homes are available to buyers who get financing through uninsured FHA loans with a lower credit score, or buyers who qualify for an insured FHA loan with a higher than average credit score.
How Do Buyers Qualify for a HUD Property?
If the borrower has a credit score between 500 and 580, the applicant can acquire an FHA loan to buy the property with a down payment of around 10%. A credit score of at least 620 could qualify for the borrower for an FHA loan with a down payment of around 3.5% of the mortgage home loan. Borrowers who qualify for USDA loans can qualify with a credit score of around 500 and avoid a down payment, but the borrower must meet income restrictions for the program.
How Do Buyers Purchase a HUD Foreclosure?
HUD homes are available through the lender that foreclosed on the property. Typically, the properties are entered into an auction, and the highest bidder purchases the property. However, some HUD homes are listed through real estate agencies if the lender wants to maximize their profits from the sale. Some financing restrictions could apply for foreclosed properties that are entered into an auction. Typically, the auctions are presented to investors who want to buy the properties cheaper, renovate them, and sell them. Private sales are conducted for buyers who want to purchase the property, renovate it, and live in the property.
Does the HUD Program Always Provide Repair Funds?
No, not all HUD programs and loan products offer repair funds. However, the borrower can get funds for the repairs through a home mortgage loan. For example, the FHA 203(B) repair escrow loan provides an account with funds to cover the cost of improving the property. The homebuyer accesses the funds as they schedule repairs and pay licensed contractors to complete the necessary repairs. If the property isn’t inhabitable, the buyer cannot move into the property until the repairs are completed. Discussing the requirements with a lender helps buyers determine the best course of action when buying the properties and getting repairs.
HUD homes are a great investment for homebuyers who want to modify and change an existing property. Buying a foreclosure presents a lower than average selling prices and might give buyers access to complete the renovations. Homebuyers who want to review these options learn more about services from Dustin Dimisa today.