How do you buy a home in HUD foreclosure?
A HUD foreclosure is property that belongs to the government. These homes are offered to low- and middle-income families, but you must qualify to receive them and be prequalified for a loan in order to bid on a HUD foreclosed home. Anyone who meets the loan requirements may qualify, but the Department of Housing and Urban Development will give priority to prospective homeowners who intend to use the home as a permanent residence. They also prioritize teachers, emergency personnel, police officers, and firefighters to relocate them to areas that are being improved by HUD’s Foreclosure program.
When you buy a home in foreclosure from HUD, you buy it as is. However, HUD’s foreclosure program puts a very low price on homes and has financial assistance programs for purchase and closing costs, and to finance the cost of repairs.
You will need to provide a loan pre-approval letter from your bank in order to bid in a HUD government foreclosure auction. This letter must be valid for a period of sixty days. Provide the pre-approval letter to the real estate agent who has been licensed as a government approved qualified lender. You can obtain HUD foreclosure listings from your government-licensed real estate agent who will also bid for you. The real estate agent should have other useful information about HUD foreclosures to assist him in the auction process.
The Department of Housing and Urban Development does not issue loans to obtain houses that are up for auction. What they will do is insure the lender against any default on the loan.
The bank will then issue an appraisal of the home you intend to buy to make sure it meets minimum housing standards and is marketable. (They will not finance something that cannot be sold as a condemned property) The appraisal will also give you an estimate of the property’s value. One thing you should also have done is a home inspection and take into account repair costs; overhaul, repairs, maintenance and additional costs.
Even when repair costs are taken into account, HUD foreclosed homes can be a profitable investment, as these homes sell well below market value to offset the repairs that will be needed on the property.