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Are you thinking about purchasing a HUD home but don’t know where to start? Let me share a few things with you to help you get started.
A HUD home is one that had an FHA loan against it, and the prior owner lost the home due to foreclosure or something similar. The end result is that HUD acquired the home and now wants to sell it.
From my experience, HUD likes to sell their homes to someone who will occupy the home as their primary residence, and who will use FHA financing to purchase the home. HUD includes a termite inspection and treatment on any HUD home that uses FHA financing.
There are 3 types of FHA loans available to purchase HUD homes (in addition to cash, conventional and VA financing). Let me detail each of the FHA options for you:
203(b) – This is a regular FHA loan. It currently requires a minimum 3.5% down payment. There is an upfront mortgage insurance premium of 1% that can be rolled into the loan. For a 30 year mortgage, there is a monthly charge of 1.15% (less for a 15 year mortgage). This monthly mortgage insurance is required on all FHA loans regardless of the loan to value. It is required for a minimum of 5 years, but will eventually drop off when the loan to value drops according to the terms. FHA financing is available on any qualified property.
203(b) with Repair Escrow – This, too, is a regular FHA loan, however, it allows for an escrow holdback for required repairs on the home. When repairs are required on a HUD home (as determined by HUD’s Field Service Manager), and the amount is $5,000 or less, this type of loan allows for the cost of the repairs to be included in the mortgage. The actual repairs cannot be done until after you own the home. You typically have up to 90 days to complete the repairs. Once the repairs are completed after closing, the new homeowner submits receipts for the repairs to the Lender. The Lender will order a final inspection to verify that the repairs have, in fact, been completed. The Lender will then issue a check to the homeowner for the repairs. This is a reimbursement only of what was actually paid for the repairs. The homeowner cannot get any cash back. If there is a balance left in the escrow account, that money is applied to the loan as a principal reduction. This type of FHA loan is only available on HUD acquired properties.
203(k) Renovation Loan – this is a renovation loan for fixing up the property to meet FHA’s minimum property standards. There are two types of 203(k) loans: the full renovation loan and a streamlined renovation loan. Most lenders offer the streamlined renovation loan. Very few lenders offer the full 203(k) renovation loan.
The 203(k) Streamline Renovation Loan allows for non-structural repairs to the home. There is a maximum of $35,000, and no minimum. There are additional charges for this type of loan up ($500 to $800), depending on the cost of the repairs. This type of loan is great for the home that needs minor repairs such as: new flooring; new appliances; interior or exterior paint; plumbing or electrical repairs; HVAC repairs or replacement, etc. For more detailed information on this program, please check out the
FHA 203(k) Loan section on my website.
Now that you know a bit about the financing that is available to purchase a HUD home, your next step is to get prequalified. Feel free to complete the
Online Loan Application on my website. Once you are approved, it’s time to find the perfect HUD home to make an offer on. You want to be sure to use a Realtor who is experience with the HUD contract and knows how to represent you on a HUD home purchase. If you need a referral or two, please call my office
at (520) 744-2292 and let me know. I will be glad to refer to you agents very knowledgeable with the HUD process.
With our combined years of experience, knowledge and dedication, the Sue
Pullen Team is Arizona's ONLY choice for 203(k) renovation loan financing!
Of course, if you have any questions, please feel free to contact
me at your convenience.
Sue
(520) 744-2292
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An Equal Housing Lender AZ MTG BK #0904162
CO ID 2289