HUD Homes and FHA Loans

HUD homes are actually really not different than a regular home, but just a house purchased using a FHA loan. HUD stands for the government's branch called Housing and Urban Development. It was created under the Housing and Urban Development Act of 1965 and it is not a lender. It is responsible for overseeing federal housing agencies, including the Federal Housing Authority, or FHA. The FHA insures home loans in qualifying areas of the United States from going into default.

Basically what happens is if your home qualifies for and FHA loan, that really means the government guarantees that if the home owner defaults on their loan, the Federal Housing Authority will cover the entirety of the loan. These HUD homes as they are often referred too, are in most cases homes that the owner had defaulted on, the government paid for and they now really own the property. But, neither the government or the lenders are interested in owning property, so they immediately go back on the market.

Since part of the agency responsibility is to promote affordable home ownership for everyone, they put these homes back on the public market, in hopes that someone will come along who is qualified to purchase a new FHA loan on these properties, and will to go through the process of establishing new financing for it. In some cases, they may even be able to assume the FHA loan that may already exist on the loan.

Finding a HUD home is not that difficult. HUD sells foreclosed homes, called HUD home foreclosures, all around the country through approved brokers. They may advertise in local papers, indicating that the are approved to sell these homes. You may also find listing services, that for a fee they can hook you up with many of these properties in your area. You can look on the internet or through many local realtors, many who are eager to get rid of these places.

An important point, to clear up a misconception some people have: just because it's a HUD home, doesn't mean that it's a great house that you can move into right away. If you are looking to purchase one of these homes, it's always a good idea to get an inspection done. There will be some that are in desperate need of fixing, so you have to check each one very carefully. You can't negotiate repairs into the contract, so you really have to think about it first. Many realtors often heavily market these home to bring in business, and when the inventory gets low, buyers often compete for the homes available, often raising the home above fair market value, so it is a good idea to base your decision on the home itself. If it is selling for more than it's worth, it probably isn't a very good deal.

The purchasing for HUD homes is different than with regular deals because they follow a closed bidding process. A release date is issued by HUD, all the potential buyers submit their best offers, not knowing what other bids have been posted. Once the agency has taken the highest offer acceptable, the others are out of luck. Because this agency is more geared towards getting owner occupants in the home, preferential treatment is given to the potential home owner rather than other investors.

If you want to check out licensedbrokers.com/browse/New-York-City-real-estate-for-sale real estate in New York, use the premier licensedbrokers.com real estate listings engine that covers the whole world.