Often times we find home prices are higher than what average area salaries can afford, but HUD homes are different because they are regularly priced well below the market value giving the new owner a lot more real estate for the money.
Even if you live in a market where home prices are outpacing salaries, there are Housing Grants to help you become a homeowner. To illustrate one such opportunity that’s out there, we’ll take a closer look at what it takes to buy an affordable HUD home at below market prices.
How HUD Homes Differ From Other Houses
Before we discuss what a HUD home is, let’s decode those three letters, so you know what we’re talking about. “HUD” stands for the Department of Housing and Urban Development, which is a government agency that lends a helping hand to keep home ownership accessible.
HUD is popularly known for its Section 8 program that pays part of your rent as one means of providing affordable housing. But if you want to own a house and begin earning equity, a HUD home is what you should focus on.
What makes a HUD home so special? Its price and the costs associated with purchasing one.
For starters, HUD homes are usually listed below the market price for other houses in the area for one reason: To attract buyers quickly. Why does the HUD need buyers fast? Because they acquired those homes when FHA loan borrowers defaulted on their loans. And since the HUD paid off the loan balance, they need that money back as quickly as possible, which is where buyers seeking a bargain can save the day.
In addition to a lower sales price, HUD homes typically ask for lower down payments and provide a cap on the amount of closing costs that can be attached with the loan. Combine all of those potential savings, and you can see how a HUD home could make it a lot cheaper to become a homeowner.
Is there a catch when it comes to HUD homes’ affordability? You could say that, as they are sold “as-is.” In short, you may need to fix them up, as the HUD will not do it for you.
Purchasing a HUD Home
If the thought of saving money when buying a house entices you, here’s what it takes to purchase a HUD home:
- Look for houses through the HUDHomeStore.
- Hire a real estate agent that’s approved by the HUD. They’ll be necessary when it comes to viewing and bidding on the home.
- Get a home inspection. This will let you know if any major repairs are needed before moving in. This is a crucial step since HUD homes are sold as-is.
- After winning the home auction, find financing through normal channels like VA loans, Freddie Mac, Fannie Mae, etc. An FHA loan can help if you have a low credit score and lack a significant down payment.