Utah HUD homes
HUD homes are homes that were purchased with an FHA-insured loan that subsequently defaulted. Because the loan was insured by FHA (the Federal Housing Administration), the U.S. Department of Housing and Urban Development (HUD), which oversees FHA, pays a claim to the lender who made the loan and forecloses on the property. The home is now owned by HUD and re-sold to homebuyers in accordance with the mission of HUD:
HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business.
In other words, HUD tries to do business in ways that favor owner-occupant homebuyers who may not be able to afford the terms of a traditional loan but who add strength and viability to communities across the country.
HUD sells its homes through a bidding process designed to minimize price negotiations, only allowing potential owner-occupants to submit offers for a certain period before opening the sale to the public at large. List prices for HUD homes are typically appraisal prices. When HUD receives an offer below list price, or, more accurately, when one of the three asset management companies who service HUD homes receives an offer below list price, it is not considered. The property is kept on the market until it either receives an offer at list price or HUD determines that its price should be dropped.
HUD homes can be purchased with cash, traditional financing, or one of several FHA-backed loan programs. Because FHA is a part of HUD, it also offers several programs designed to benefit owner-occupant homebuyers and others deemed to add value and diversity to communities. In general, FHA loans require fewer up-front costs. FHA 203b and 203k loans can be made on properties that need minor repairs (under $5,000) in order to be insurable or on properties in need of major repairs, respectively. FHA's Good Neighbor Next Door initiative allows law enforcement officers, teachers, firefighters and EMTs to purchase HUD homes in designated revitalization areas at a 50% discount. Other discount programs are offered to non-profit organizations.
The only way to purchase a HUD home is through a licensed and registered real estate brokerage. The brokerage must be certified with HUD, or your home offer can not be submitted. One way of determining whether a potential real estate agent and their brokerage is both 1) registered with HUD and 2) knowledgeable about the HUD home purchase process is to ask them for their NAID number. If you get a blank look, you might not have found an agent who can best serve your needs.
Finding a lender who is familiar with HUD and FHA-specific lending programs is equally important. Many lenders do not have experience with FHA 203x loans and will not be able to offer the full extent of lending programs available to you. Before you begin searching for your HUD home, make sure you find a qualified and registered agent and brokerage who you feel will be able to work with you and make sure you find a lender, through your agent or otherwise, who knows HUD and FHA inside and out.
Utah Home Group's blog is an informative and regularly updated resource covering Utah-specific loan information, grant programs, down payment assistance, and FHA loans.
hudhomestore.com is HUD's own search portal and contains detailed information on HUD listings that might not be available on the MLS.
For more information or assistance with a HUD home search, please contact us at 8018309292 (toll free).