Home Buying Guide from HUD
The home you've been Dreaming of could be a HUD home
If you have been dreaming of your own home; a home for you and your family, a place of your own! HUD could help you attain your dream home! HUD is the United States Department of Housing and Urban Development! This is a government agency developed to help the American Dream come true for everyone!
In 1934 HUD's Federal Housing Administration (FHA) was developed. Since then the FHA has helped millions of Americans in attaining a Home of Their Own! The FHA does make it easier and more affordable! One way they do that is by offering HUD homes. You can find HUD homes in many communities throughout the U.S., at reasonable prices and economical terms.
Whether you buy a HUD home or any other home FHA has a reasonable loan for you!
Calculate just how much home you can afford
You need to calculate just how much home you can afford; before you go shopping for a home. The FHA formula that FHA and its lenders use is simple; you can calculate that 29% of your monthly gross income is what you can pay in the form of a monthly mortgage payment. This also depends on how much other debt you are carrying. But if you have no other debt you can calculate that 41% of your gross monthly income is what you can spend on a monthly mortgage payment.
Also to give you a easier way of looking at this is you can afford 3 to 4 times your annual gross (before taxes) income as a purchase price depending on how much debt you are carrying. This is a bit conservative but, say if your annual income is $30,000. your shopping for a range of $90,000 to $120,000. in a purchase price; maybe a bit more depending on your situation. The FHA loan officer can help you with that. Also before you shop you should get a pre-approval that way you can feel confident in your shopping for a home. Again your FHA loan officer can provide you with the pre-approval.
FHA is here to Help
So many questions and things to consider! FHA is here to help you with those questions! Once you have been pre-approved a good place to start is a real estate agent. The real estate agent can help with not only finding a home but with information on the schools in the area and community information; that would be helpful to your needs. They can guide you through the process of purchasing a home. Dealing with the contracts and offers, also being their for you.
Buying a HUD Home
But if you are buying a HUD home you are required to use a real estate agent. The real estate agent will help you with all that is required in finding and purchasing a HUD home. The one thing that is different than purchasing a non HUD home is that with a HUD purchase there are no negotiations between buyer and seller. This can be a advantage; there is no haggling about price. Everything is spelled out in black and white. When your offer is accepted the closing of the loan for the property will be within 30 to 60 days. You must find a HUD real estate agent; this is not hard all you need to do is call a few agents and ask. Also HUD will pay the brokers commission; you do not have to pay that.
You can find HUD homes on multiple listing services and on the the internet on this site http://www.hud.gov/homes/ , with this site you can access HUD homes from any state. Your real estate broker would have all the information you may need. Almost every one of the HUD homes would need some improvement; some more than others. This can be a great affordable opportunity for that fixer upper! Many are in fine neighborhoods, and some do qualify as handyman specials; many are in good condition.
HUD does not give warranties on the the HUD homes but it will disclose the condition of the property and this can help you in formulating your bid. The FHA HUD loan program that can help refurbish the home is called 203(K), this is were the borrower can borrow extra money form the price of the loan for renovations to be made to the home. You later repay these funds as part of your mortgage. Just be aware that a 203K loan is not available in all areas; ask your real estate agent about the availability in your area.
When you have found your dream home HUD urges you to get a home inspection before you make a offer on the property. This can give you an edge in what to submit as your offer! Making a offer on a HUD home can be much easier than purchasing a home in the private market! Your bid is submitted electronically through computer, a touch tone phone, or by real estate broker. The one with the highest bid is generally awarded that HUD home.
HUD's initial listing is based on a independent appraisal. HUD may accept an offer less than the listed price, this depends on how long the property has been listed and what are the current market conditions. Sometimes buyers may offer more than the listed price; if the property is appealing; there maybe more bidders. Please be aware that property values are established by HUD and submit offers knowingly.
When you make a offer on a HUD home it will be done during the designated “Listing Period”. During this time all potential purchasers will submit their bids. However the priority will be given to owner-occupant offers, for the first 10 days as follows: All owner occupant offers received during the first 5 days of the 10 day listing period will be considered to have been submitted simultaneously. The first day after the initial first 5 days (the 6th day) all owner occupant bids will be reviewed, at this point the one with the highest bid will be accepted.
If there are no owner occupant bids; the bids will be reviewed on a daily basis for owner occupant bids till the end of the listing period (the remaining 5 days). At the conclusion of the listing period if no own occupant bids are present HUD will then review all bids (investor) received during the 10 day listing period. In other words for the 1st 10 days only bids from bidders that wish to live in the home are reviewed for the highest bid. After that if you plan on investing in the home, investor bids will be reviewed for highest bidder.
Once your bid has been accepted you then need Earnest Money. Earnest Money is a deposit towards the purchase price of the home. This shows that your offer is serious, if your offer is accepted the Earnest Money then becomes part of your down payment or closing costs. If for any reason your offer is rejected the broker will return your earnest money.