What is a HUD Home?When someone with a HUD insured mortgage can't meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. HUD then sells the home at market value through a Marketing & Management Contractor.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.If you are an evacuee displaced by Hurricane Katrina, Rita or Wilma, you may be eligible to purchase a HUD Home at a discounted price. How can I buy a HUD home?Start by finding a participating real estate agent. Your real estate agent must submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all offers are opened and considered to be received simultaneously, and, basically, the highest acceptable net bid is accepted. If the home isn't sold in the initial Offer Period, you can submit a bid until the home is sold. Bids can be submitted any day of the week, including weekends and holidays. They will be opened the next business day. The results from the review of all accepted bids are posted on our website. It is the responsibility of the real estate agent to check our website for accepted bid information and ensure that all the required forms are properly filled out and sent to us within two business days of acceptance. How can I find an available HUD home?HUD homes are listed on our website and in the local MLS. Any single family property acquired by HUD FHA will display a sign identifying who is managing the property before it is listed for sale. During this time the property is appraised, title issues are resolved, if necessary, and a determination is made about the property's eligibility for HUD's discount sales programs. Property listings are posted on HUD Home Store. For more information, contact the Management and Marketing Contractor serving your area.Who can sell HUD homes?Any licensed real estate agent or broker who is registered with HUD may sell HUD Homes. What is a NAID number?A NAID number is a Name Address Identification Number issued by HUD. This number allows the agents and brokers to submit bids on behalf of prospective buyers of HUD homes. What is Owner Occupant Period?When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers, however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified below. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids. When can an Investor submit a Bid?When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers (including investors), however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified above. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids. What is FHA financing? There are three main types of FHA Financing. More information may be obtained from any mortgage company familiar with FHA Guidelines for the various programs. (1) 203(b) Regular FHA Loan - Listed as "IN"• If the Property does not have any mandatory repairs FHA will insure the Loan hence the classification of "IN" (2) 203((b) - Repair Escrow - Listed as "IE"• When a property has less than $5000 in repairs to bring it up to Minimum Property Standards, FHA will insure the loan provided the repairs are completed by the Buyer or the Buyer's agent within 90 days from the date of Closing. • It is a cost to the Buyer that the Buyer can finance and add the amount to the mortgage. • The Lender monitors and keeps the funds in an escrow account for disbursement on completion of repairs to the Lender's satisfaction. (3) 203(k) - Rehab Loan - Listed as "203K "• When the property has more than $5000 in Minimum Property Standards repairs to be done. • The Lender must obtain an Inspection report from an approved 203(k) consultant and a new appraisal. How is the repair escrow amount determined?The FHA appraiser lists the estimated cost of repairs needed to bring the property up to minimum FHA standards. This amount is then multiplied by 110% and this amount is listed as the repair escrow amount. Example: if repairs total 1,000.00 x 110% = 1,100.00. The Repair Escrow amount will be listed at $1,100.00. How do I determine the mortgage amount when there is a repair escrow? The DE Underwriter will determine the final 203(b) mortgage amount. The DE Underwriter will take into account the repair escrow amount to determine the FHA loan amount. The DE underwriter will determine this amount. Regardless of whether or not a repair escrow will be used in the purchase of a home, the lines on the Sales Contract that request the down payment amount and the secured mortgage amount should be filled in "TBD" (To Be Determined). The line associated with the length of the loan should also be filled in TBD. Please remember that the repair escrow amount needs to be filled in only if the buyer is using 203(b) repair escrow financing. Will HUD pay for any closing costs and selling agent's commission?HUD allows up to 5% Real Estate Commission. Although HUD may pay for these costs, keep in mind that the higher the closing cost and commission will reduce your Net to HUD and may affect your competitive bidding ratio. For more information, ask your real estate agent or the listing broker. HUD will allow to be deducted from its proceeds, purchaser financing and closing costs that are considered to be reasonable and customary in the jurisdiction where the property is located. In no event may these costs exceed 3% of the property's gross purchase price. Please reference HUD Notice H2006-12 for additional information. Please refer to page 2 of your state/regional Forfeiture and Extension Policy for a list of the closing costs that will automatically be paid by HUD and other closing costs that may be paid by HUD. Is there anything else I should know about HUD Homes?More information is available on HUD's website: Houses built before 1978 may have lead-based paint which can cause harm to your family; so be sure to read about this hazard and about what you would need to do to correct it. If an investor cancels escrow due to property financing because of value not being there, does he lose his deposit?YES. Refer to Addendum A. The only guidelines that will allow an investor to get any portion of their earnest money back is if an investor is using FHA financing and the FHA underwriter determines that the investor is not an acceptable borrower, then 50% of the earnest money deposit will be refunded.As you know, FHA’s loan products are not set up for investor use; so the potential for an investor to receive any portion of their earnest money back is remote.If someone does not have a social security number is there any way for them to bid?No What if there is a lien on a property? Who pays for it?All homes must have a “Clear Marketable Title” which means that a buyer must have a clear title. Most times when a county places a lien on a property, HUD pays the lien, providing it’s a straightforward lien such as unpaid utility/county bills.Should I Get a Home Inspection? HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs. Since the new owner will be responsible for making needed repairs, HUD strongly urges every potential homebuyer to get a professional inspection prior to submitting an offer to purchase.If you are interested in acquiring a HUD Home that is in need of repair, you may be interested in applying for an FHA 203(k) Rehabilitation Loan. When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. What About Financing?HUD does not provide direct financing to buyers of HUD Homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender. If you have the necessary available cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. While HUD does not provide direct financing for the purchase of a HUD Home, it may be possible for you to qualify for an FHA-insured mortgage to finance the purchase.Does FHA Offer Any Special Discount Sales Programs?FHA REO properties located in designated Revitalization Areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments. Read more about these Good Neighbor Initiatives. PEMCO was selected as one of the AM contractors for five contract areas - 1A, 2A, 1D, 2D, 2S. PEMCO has offices in each HOC area awarded, Atlanta, Denver and Sacramento.
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