Who is HUD?
HUD is the U.S. Department of Housing and Urban Development. In 1965 the Department of Housing and Urban Development (HUD) was formed. Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender.
What is a HUD 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.
Who can buy a HUD Home?
Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. 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.
Nine Steps in Buying a HUD Home
The home buying process can seem complicated, but if you take things step-by-step, you will soon be holding the keys to your own home! The nine steps to buying a home are:
Step 1: Figure out how much you can afford
What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. The calculators below can help, but it is best to visit a lender to find out for sure.
Step 2: Know your rights
You can speak to your Real Estate agent that will cover in detail your rights or investigate for yourself a wealth of information found on the HUD website.
Step 3: Shop for a loan
Save money by doing your homework. Talk to several lenders, compare costs and interest rates, negotiate to get a better deal. It is imperative to get pre-approved for a loan so you can compete in today’s competitive market.
Need help buying a home? You may qualify for one of these programs.
Step 4: Learn about home buying programs
Statewide and Regional Programs
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California Housing Finance Authority (CalHFA) - homebuyer programs, including downpayment and closing cost assistance |
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California Affiliates of Habitat for Humanity - through volunteer labor, builds and rehabilitates houses for families in need |
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U.S. Department of Agriculture Rural Housing - homebuyer programs in rural communities |
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Clearinghouse for affordable housing and community finance resources - a source of information on over 200 housing programs, government, private lenders and foundation grants |
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Community contacts - find out if your community offers homeownership assistance |
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Cal Vet Home Loans - for Veterans to buy a home in California |
Step 5: Shop for a home
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Choose a real estate agent |
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Make a Wish list - what features do you want? |
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Have a home-shopping checklist – take this list with you when comparing homes. Your Real Estate agent will provide you with one. |
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Look through homes for sale. Your agent will send you emails and take you to preview homes in person. |
Step 6: Make an offer
Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.
Step 7: Get a home inspection
Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.
Step 8: Shop for homeowners insurance
Lenders require that you have homeowners insurance. Be sure to shop around. Your Real Estate Agent usually will assist in gathering quotes for your review and final decision on insurance.
Step 9: Sign papers
You're finally ready to go to "settlement" or "closing." Be sure to read everything before you sign! You will have a notary to explain all the fine print and answer all of your questions.
How are HUD Homes sold?
All properties available for purchase by the public are offered for sale and maintained by management companies under contract to HUD. Any real estate broker registered with HUD may submit an offer and contract to purchase on your behalf. HUD pays the real estate broker's commission, if included in the contract.
Are there any special programs?
Properties in designated areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments.
Should I get a home inspection?
We 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.
What about financing?
Although HUD does not offer financing directly, some of our homes qualify for FHA-insured loans. Shop around for a lender to find the best loan terms.