Frequently Asked Questions About HUD

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1. What is a HUD home?
2. Who can buy a HUD home?
3. How can I buy a HUD Home?
4. What is an owner occupant?
5. I am an investor, when can I submit my offer?
6. Do I need a pre-qualification letter before I submit an offer?
7. What is FHA financing?
8. How will I know if my offer is accepted?
9. What is the Good Neighbor Program?
10. Is there anything else I should know about HUD?

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1. What is a HUD home?

HUD insures home loans. In the event that the loan insured defaults HUD will pay the lending institution the loan's balance. In return HUD acquires the property and places it on the market; making the home available to the general public.

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2. Who can buy a HUD home?

HUD homes are available to anyone who qualifies for the mortgage or can pay in cash.

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3. How can I buy a HUD Home?

In order to purchase HUD homes you must begin buy finding an authorized HUD brokerage or agent. The process begins by your agent submitting your offer. Typically HUD homes are sold during an "offer period". Once this period has expired, all of the offers are opened and the largest reasonable net offer is accepted. In the event that a reasonable offer is not submitted, HUD will continue to accept offers on the property until the home is sold.

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4. What is an owner occupant?

When you place an offer as an "owner occupant" it means you intend on using the property as a primary residence for at least one year. HUD advocates homeownership and there for places precedence on "owner occupied" offers.

Those purchasing the property as owner occupants must live in the home for one full year. In addition parties purchasing property as owner occupants must wait two years before purchasing another home as an owner occupant.

In the event there are not any acceptable owner occupied offers, HUD will offer the property to investors.

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5. I am an investor, when can I submit my offer?

As an investor you can submit your offer at anytime, keep in mind that HUD will first entertain offers from "owner occupants". In California there is a 10 day period that HUD accepts offers from "owner occupants" after the 11th day HUD will evaluate the offers. If there are no reasonable "owner occupant" offers HUD will evaluate investor offers until the home is sold.

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6. Do I need a pre-qualification letter before I submit an offer?

Yes. If you plan on placing an offer on a HUD property you must obtain a pre-qualification letter. This eliminates the risk of tying up property with a transaction that is unlikely to close. This letter must come from the lender, and stipulate the amount of the loan. In addition the letter should include the name of the buyers the lender has approved.

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7. What is FHA financing?

FHA is an insured loan. There are three types of FHA loans:

1. 203(b) Regular FHA Loan - Listed as "IN"
   This means that the property does not have any mandatory repairs.
2. 203(b) Repair Escrow - Listed as "IE"
   FHA will insure a loan with less than $5000 needed for repairs to bring property to minimum property standards. FHA will insure the loan provided that the buyer or buyers agent will remedy the repairs within 90 days from the date of closing.
3. 203(k) - Listed as "203K"
   FHA will insure a loan with repairs greater than $5000 provided an inspection report from an approved 203(K) consultant and appraisal is completed.

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8. How will I know if my offer is accepted?

At the end of the offering period, HUD posts the results. On your behalf your agent will check our website for results and file all the required documentation with HUD within two business days of the accepted offer.

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9. What is the Good Neighbor Program?

HUD has a program called the Good Neighbor. It was designed to encourage revitalize communities. Under the Good Neighbor program there are four initiatives- The Officer Next Door, The Teacher Next Door, The Fire Fighter Next Door, and The Emergency Medical Technician Next Door. These initiatives give a 50% discount to police officers, teachers, fire fighters, and emergency medical technicians who purchase homes as owner occupants in designated revitalization areas. In addition to the 50% discount, participants in the Good Neighbor program need only pay $100 towards their down payment if they use a FHA insured mortgage for financing.

HUD stipulates that participants execute a second mortgage and note which will be for the amount of the discount which HUD can call at a later date if the buyer fails to re-certify. In addition, the buyer must not own ANY residential real property other than the Officer Next Door/Teacher Next Door/ Fire Fighter Next Door/ Emergency Medical Technician Next Door Home. If these guidelines are not met, the remaining balance of the second mortgage becomes due immediately. All Good Neighbor participants must submit a contract bid of 100 percent of the listing price. Winning bidder will be chosen by lottery. The 50 percent discount will be applied at closing. Teachers must be employed in the school district that they purchase a home in under the Teacher Next Door Program. More information on this program can be found at http://www.hud.gov/offices/hsg/sfh/reo/goodn/main.cfm

Good Neighbor program participants are required to own and use their property as their sole residence for at least three (3) years.

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10. Is there anything else I should know about HUD?

HUD'S website is an excellent resource to for persons interested in purchasing HUD property.

http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm

If you would like to learn how to purchase HUD Homes, contact Oak Tree Realty Group at 951-973-7177.

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