Info needed: How does a home become a HUD home?

Question

I am thinking of purchasing a home and making repairs and would then like to sell it as a HUD home---I am not a real estate agent or broker, nor a construction type---just curious what all is involved. Is this a good way to make a bit of extra money and potentially help others? (Serious answers preferred.)

Thank you so much for all the info!! I have tried reading on the HUD page, but couldn't make any real sense of it. You all have helped SO much. I appreciate your sharing your time and knowledge with me!! All Best Answers!!

Answer 1

Well, I've heard the term and believe it's a reference to the following scenario. HUD (Department of Housing and Urban Development) insures first mortgage loans that banks make through FHA (Federal Housing Administration). When one of these loans goes into default (foreclosure). The house is called a "HUD" house because HUD owns it. They pay off the bank that made the original loan and take the property.

I think what you want to do is buy a house and rent it out to Section 8 qualified tenants.

Answer 2

I think you may be referring to a home that is being sold by HUD after foreclosure. If a person finances a home with a HUD/FHA loan guarantee it reverts to HUD after a period of missed payments.

If you are not experienced in real estate or construction, this is NOT a good idea. The real estate market is generally weak compared to even one or two years ago. "Flipping" (buying a house/fixing it up/selling at a profit quickly) can be profitable but it's very unlikely for someone with little or no experience. It would be VERY easy to find you have to spend far more than you thought for repairs and then wait a year for someone to buy it.

Answer 3

Sorry - a HUD home financing is for people who are wanting to purchase a home that THEY ARE GOING TO LIVE IN. It can not be for investors wanting to fix it up. There are alot of really good programs out there for Non-Owner Occupied (NOO Programs) what will allow you to purchase the property, maybe at a interest only, so the payment is lower until you are able to sell it. Just make sure you have a no pre-payment pentality. The rate will be higher, since lenders want to keep a loan, and not have the person refinancing it.

Now, Nikki mentioned that a HUD home is for ppl with poor credit, HUD is for LOW INCOME HOUSING - NOT necessarly POOR Credit.

The USDA Rural "Direct" Program is for people who what a home, have lower income (NOT CREDIT), and it is a sub-sidized payment so they can afford a home - Judgements, Collections have to be paid (unless they have a 660 credit score, than exceptions are made). If you go to the link below, a person could make 42,000-48,000 in a 2 person home and be considered Median Income, and still qualify for the Direct loan - very low is 21,400 - 23,000. Low is 34,250 / Moderate Income is 39,700 etc.

The USDA Guaranteed Housing is different, it is Low income 30,800 Varies per county's, to Moderate income 48,000 varies per county for 1 Person, and the income rases per person in household. This is 100 percent financing, but the payments are not subsidized. It is a fixed rate with no MI in the payment. There is NO Minimum credit score's needed - but collections and judgements have to have been paid.

The Rural Advantage Program is with a 620 minimum middle score.

All of the above programs have Debit to income (DTI) ratio's and they lower than most conforming and sub=prime lenders.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Answer 4

You can buy the home by showing up at the public auction with a certified bank check in the amount required of bidders (typically $5,000.00, but sometimes $10,000.00 or more) and being the high bidder for the property. First, you need to know whether this is a first mortgage that is being foreclosed. If it is, then it will extinguish all junior mortgages, attachments, executions, and tax liens other than a taking for non-payment of real estate taxes. Second, you need to get pre-qualified for a mortgage in an amount that will enable you to finance the rest of the purchase price if you are the high bidder. That also means that you must have enough cash on hand for the required down payment of 20%. If you don't have 20% down, then it may affect the willingness of a bank/mortgage company to finance you, or at least make it more expensive to borrow the amount you need to complete the purchase. Third, you need to complete the purchase within 30 days of the public auction, so you have to have everything in place before then. Your relative should consider filing a Chapter 7 petition in U.S. Bankruptcy Court in order to delay the foreclosure if necessary. If there is any equity in the property, then he should consult a bankruptcy attorney to determine how he can salvage some of the equity for himself. Lastly, you need to know that you aren't buying a pig-in-a-poke. Your relative should allow you to do a home inspection so that you know whether the roof needs replacing or the boiler is about to go, et cetera. You can't afford to overextend yourself to buy a house that needs several thousands of dollars in repairs unless you can, in fact, afford it. Good luck. Get a good real estate attorney to help you. Always buy an owner's policy of title insurance. If you don't and a problem is discovered in the future then you will have to retain your own attorney to solve the proble or sue someone, which will cost you thousands of dollars out-of-pocket that you cannot recoup. Spend the extra money for an owner's policy of title insurance, you will be required to buy a lender's policy of title insurance for your lender, so for $500-$1,000 more you can buy the owner's policy. Good luck.

Answer 5

its not a hud home...its a program that the lender gives people that want to go 100% financing, but have poor credit. The bank is the one that does the HUD or the FHA loans, its the type of bank loan, not the type of house.

Answer 6

Contact HUD, I've never heard of that.

Answer 7

That's interesting

Answer 8

Thanks to each and everyone of you for the replies.