HUD FAQ's

A1: HUD is an acronym that stands for Housing and Urban Development, a cabinet of the United States. It has existed since 1965 and is charged with ensuring smooth policy for housing and city development. One of the main functions of HUD is its role as a lending facilitator. HUD helps people of low- and mid-level incomes acquire loans to purchase housing. HUD itself is not a lending institution, but it approves lenders and supports them materially.

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.

Q2:How do I find HUD properties?

A2: HUD issues mortgages through the Federal Housing Administration (FHA). It acquires property from lenders that foreclose on FHA-insured mortgages. They then sell these properties to the public. HUD properties can be found on its Web site and in newspapers. HUD also hires management companies or real estate agents to market HUD properties; you can find these listings in the Multiple Listing Service (MLS).

Q3: How do I initiate the buying process? How much money is needed?

A3: Bids for HUD owned properties must be submitted by a broker or agent who is registered with HUD to place a bid on a property. Your bid will be submitted through HUD's website. HUD holds all the bids until the offer is closed and then determines who offered the highest bid. If yours is the winning bid, you will have 48 hours to sign a contract. The real estate agent should have all the paperwork ready to go; therefore, loan pre-approval letters are critical in the bidding process. The required deposit for a HUD property can be as low as $500.

Q4: Who can buy a HUD home?

A4: Anyone who can qualify for a mortgage or who can pay cash may buy a HUD home. Owner occupants must live in the house as their primary residence for at least one year and may not purchase another HUD home as an Owner Occupant for two years. Buyers must use a broker or agent who is registered with HUD to place a bid on a property.

Q5: What is FHA financing relative to HUD homes?

A5: FHA stands for Federal Housing Administration and is federal governant agency that insures mortgage insurance to lenders which 1) protects the lenders in the case of defaulted loan and 2) provides homebuying opportunities for all types of buyers.

There are three main types of FHA Financing: 1) 203(b) Regular FHA Loan, 2) 203((b) - Repair Escrow and 3)203(k) - Rehab Loan. More information may be obtained from any mortgage company familiar with FHA Guidelines for the various programs