How to Finance a HUD Owned Home

By Charles Green

HUD homes are one to four unit houses which have been acquired by this federal government agency once an FHA-insured home has gone through foreclosure. While HUD attempts to find buyers for these homes, working with management companies under license to HUD, the agency does not finance these homes. There are many home loan options available for qualified buyers elsewhere.

Contact Lenders. Like any home offered for sale, you can seek financing from any lender willing to write you a mortgage. Lenders are much more concerned about your ability to pay a home loan back than how you acquired the home, which means you can talk with your bank or credit union about a mortgage or obtain price quotes online through a website such as lendingtree.com.

Approach the FHA. HUD homes are repossessed FHA properties, therefore the FHA is already familiar with the property. If you meet FHA lending guidelines, then you can ask any lender if they are approved to write FHA loans. The advantages of an FHA loan are many: you do not need to have perfect credit, it easier for you to qualify for a loan, you can put down as little as three percent and loan terms are quite favorable. Importantly, the FHA works with homeowners who get into a financial bind, doing everything they can to help you avoid foreclosure.

Look into getting a VA. If you are a member of the military, a veteran, or a close family member of the same, then you may qualify for a VA loan to cover the costs of financing your HUD home. You need to obtain a Certificate of Eligibility by completing VA Form 26-1880. Once it has been determined by the Veterans Administration that you are eligible for a VA loan, then you can work with any VA-approved lender. A VA loan can cover 100 percent of the costs of a home with VA fees included.

HUD makes exceptions for teachers and law enforcement personnel who want to a HUD home by arranging financing for them.

HUD homes are sold "as is" which means you should obtain a professional home inspector to learn what the costs of your repairs will be and deduct those costs from your offer.

If you bid on a HUD home and it is accepted, but you decide not to buy the home, you may lose your deposit.

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