$100 Down Payment Program offered by HUD

This lovely Lawrenceville home was offered at only $115,000 by HUD

In this article I will be explaining the $100 down payment program offered by HUD for Owner Occupants to purchase a home.

A HUD home is a 1 to 4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.
If you are an evacuee displaced by Hurricane Katrina, Rita or Wilma, HUD could sell a HUD home at a discount to you. (I will be writing another article on that soon!)

All properties available for purchase will be listed on http://www.bidselect.com/  This is a contrator hired by HUD to manage their lsitings.  You cannot buy the properties directly from HUD, Bidselect, or the contractor that is used in Georgia to process the paper work (PEMCO).  If you ae interested in purchasing a HUD home you must contact a HUD approved Real Estate Broker.  The Brokers working with HUD properties must go through an annual renewal process and they are (should be) familiar with the HUD bidding process, which is much different than that of general sales and working with other agents.  Also HUD uses its own key for agents to enter their properties and the HUD owned homes are not on any lockbox for you to enter on your own, or for any agents that are not HUD approved to use via the agent SUPRA lockbox.

The $100 Down payment Program
I love this program.  After congress did away with most of the down payment assistance programs last year, it left a gaping hole in the market.  Many people wanted to purchase a home, however coming up with the 3.5% down payment requirement dashed a lot of the dreams of the first time home buyers.  Many buyers can afford to maintain the monthly payments, however saving a lump sum of money proved difficult for many.  Thus the HUD $100 down program became much more attractive.

Basically if you are going to live in the home, HUD will allow you to close with a $100 down payment.  Once your successful bid is acknowledged by HUD (accepted), then your Broker will fill in $100 where the contract asks for the down payment amount.  HUD will still expect you to pay them the earnest money amont which is $500 for homes less than $49,000 and $1000 earnest money for homes more than $50,000.   Your loan amount will basically be almost 100%.  This is allowable by HUD and most banks will allow this type of financing when you are purchasing a HUD home.  But I suggest making sure your lender is aware that you are looking at HUD homes and intend on buying one.  The last thing that you want is an ugly surprise at the closing table, because believe it or not, although allowable by HUD, some lenders will not fund on a 100% financed home.

Another nice buyer bonus is that HUD will also give you a $1,000 buyer bonus at the closing table if you are going to be an owner occupant and if this it the first time the home has been listed by HUD and if your bid is won within the first 30days of the listing.  You can use this toward additional closing costs or it could mean you get some cash back at the closing table.  You will have to get with your lender to see how these funds can & will be applied.

Many times when buyers think of HUD homes, they get an image of an old beat up run down fixer upper.  Well let me tell you that is most certainly not always the case.  Now HUD does have many homes in it's website that are not FHA insurable (meaning the repairs will cost more than $5,000 to make it pass an FHA inspection for FHA financing), but please know that due to the economy and the flood of foreclosed homes coming on the market, HUD has some fabulous properties!  Newer and move in ready!  There are really some jewels!  They list properties typically on Wednesdays & Fridays.. and the bidding time varies.  It can be anywhere from a few days to a few weeks.

I suggest placing your bid on a home as soon as you know that you want it (of course after you have had the opportunity to walk through and asses the property).  Hud will take the highest & best bid, and in the case of a tie.. whoever bid first will typically win.  They are about business and impartial when it comes to these things.  So do not take it personal if you do not win the bid on the home you want.. just keep looking and bid on something else, and hey you never know, sometimes if the original buyer does not complete the purchase, HUD will place the home back on the market and notify your HUD broker that it is available again!

I encourage you to get an inspection after your offer is accepted. All HUD Homes are sold AS-IS, without warranty. HUD will not make repairs nor pay to correct any problems.  As a courtesy HUD will provide you their property inspection report done by their contractor.  It is a basic report to notify HUD about the general condition of the property as well as it helps HUD catagorize and price the property including figuring possible escrow repair costs.  HUD will not turn on the utilities for you.  You will have to contact all utility companies and get the utilities turned on in your own name for the inspections.  Yes, unfortunately that means you will have to pay any required deposits for this as well.  Please note, if you are purchasing a home during the winter months you will have to pay a de-winterization fee.  Typically $150 directly to HUD.  In the de-winterization process they pay a contractor to safely and securely drain the water from the home and shut off all utilites so that the home does not suffer any damage from being vacant.

If you elect not to get an inspection done on your home I strongly suggest getting a home warranty at closing.  These cost any where from $300 to $500 depending upon the coverage and the trip visit amount in case you have a problem.  But at least this will cover you in case of any major issues after you close.

Last but not least.. financing!  You must get an FHA loan to qualify for the program mentioned above.  You do not need FHA financing to purchase a HUD home, only if you want to take advantage of the $100 program!  I will be giving you more detailed information about FHA loans in a future article!
Thanks for reading!