How to Buy a HUD Foreclosure

June 12, 2011 1 Comment

How to Buy a HUD Foreclosure

By Thomas Straub

A HUD foreclosure is a different kind of government owned property. Even though lower and mid-level income people are most often targeted by the HUD foreclosure procedure, you must still qualify to receive the properties.

The US Department of Housing and Urban Development (HUD) gives priority to prospective home owners who intend to live in the homes they are purchasing. In addition, they must already have been accepted for a loan to be able to bid on the property. However, anyone who can meet the requirements of the loan can also bid on the property.

In neighborhoods that are being upgraded by HUD, priority may also be given to teachers, emergency responders, police officers, and fire fighters so that they will be willing to relocate to those neighborhoods.

A HUD property that has been foreclosed upon is always sold “AS-IS”, or in whatever shape it comes in. That is offset by the lower prices of the properties offered for sale by HUD, financial aid for the prospective home owner, payment of closing costs, and helping with repair costs. Note that any financial aid received for the purchase and upkeep of the property will be added to the bidding price when the property is sold at auction.

To purchase a HUD property, you will have to work with a HUD approved real estate agent. You will also need a letter of preapproval from your issuing bank, which should be good for sixty days. Simply give your preapproval letter to your real estate agent as soon as you start to work with them.

While you can get listings of home auctions at the HUD website, it is usually better to get your listings through your real estate agent who will do the bidding for you. They usually also have additional helpful HUD foreclosure information that they can offer you as well. You can usually get a good idea of the condition and type of property offered in the area that you are interested in, and the usual bidding prices, by looking into previous HUD property sales.

In the current state of the economy, getting government backed bank loans is becoming more important than ever. While HUD does not issue loans itself, it will insure any lender against default of payment on your part. This way you can usually get a prime loan with a low down payment, even if you do not have a stellar credit rating.

It is a really good idea for prospective home buyers to have the property inspected to know how much their HUD foreclosure is worth when factoring in the costs of fix-up and refurbishment as well as any repairs, maintenance or addons.

Your loan issuing bank will issue an appraisal for the home you are interested in buying. This is done to make sure the property meets minimum housing standards for both housing and HUD purposes, and that it is marketable. Not all homes can be sold, such as condemned properties. The benefit to you is that the bank appraisal will give you an estimation of the value of the home, which you can use for bidding purposes.

Check out Home Mortgages for more information.

Tom Straub is the owner of Tom Straub Publishing and an Ezine Articles Expert Author that has written articles on a variety of subjects since 2006.

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