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INFORMATION PRE-QUAL ON LINEWhat Is A HUD Home? The United States Department of Housing and Urban Development (HUD) oversees the Federal Housing Administration (FHA), which provides federal insurance on home mortgages. If the borrower fails to make payments on an insured FHA loan, the mortgagee forecloses and files an insurance claim with HUD. At the time the insured loan balance is paid to the mortgagee by FHA, HUD receives title to the property. At this point, the house becomes a HUD owned home. HUD did not foreclose or repossess the property, but acts as receiver after the foreclosure has occurred. The Management and Marketing (M&M) Contractor then begins the process of working to maintain and sell the properties according to HUD guidelines. Who Can Buy A HUD Home? Any qualified purchaser can offer to buy a HUD home, regardless of race, color, religion, sex, national origin, handicap, or familial status. We abide by all U.S. Fair Housing standards and guidelines. Buyers must work through a registered HUD real estate broker to bid, and they must have a letter stating that they are pre-qualified (with Credit Report performed and reviewed by the lender) for the loan amount they anticipate will be needed. Financing the Purchase of a HUD Home The Federal Housing Administration (FHA) is the best choice for financing most of these properties. Depending upon the condition of the house, an FHA 203(b) loan or an FHA 203(k) loan may be used; in which case, the property will not be re-appraised by the lender to determine its current "as-is" value. Overbidding the appraised value requires the buyer to add the difference to the FHA down payment amount needed at closing. Of course, any HUD property may also be purchased for all cash, or with conventional or other financing, subject to the lender's requirements for that type of loan. For details about different options for FHA and non-FHA financing, please visit our Mortgage Lenders page for information on how to contact a local lender. Listing Codes and Financing Categories An independent FHA-approved appraisal and an inspection are completed within two weeks after conveyance of the foreclosed property, and the reports are sent to the Regional Office. A Disposition Plan is determined and the house is initially listed at the appraised value, according to the FHA financing category that is appropriate, given the current condition of the property. It is important to understand the listing codes and how financing is affected. 1. Insurable (IN) Properties listed in this category appear to meet FHA 203(b) financing requirements. No obvious repairs are necessary for HUD to insure an FHA loan to a qualified Purchaser. 2. Insurable with Repair Escrow (IE) Properties listed in this category are eligible for a 203(b) FHA loan with repairs totaling less than $5,000 to be made by the Purchaser, financed by the FHA lender. If a 203(b) FHA loan is the financing, the repair escrow must be used for the needed work specified in the listing. In completing the Sales Contract HUD-9548, the escrow amount is NOT deducted from the net to HUD to derive the amount that will be entered on line #7, NOR is it added to line #3, the price. The lender making the new FHA 203(b) loan establishes an escrow account for the amount of the repairs. The amount given with the listing includes a 10% contingency. After close of escrow, the lender will inspect work as it is completed on the house and distribute the repair monies as appropriate within ninety (90) days. The costs of repairs are included in the loan amount and repaid by the borrower as part of the house payment. Any funds in the escrow account that are not used to make the repairs will reduce the unpaid balance of the loan. Note that the repair escrow only applies to FHA 203(b) financing. If non-FHA financing is used, or if an all cash purchase is made for an IE property, the repair escrow does not apply. 3. Uninsurable (UI) Properties listed UI, uninsurable, need more extensive repairs after close of escrow and are deemed not eligible for FHA mortgage insurance in their "as-is" condition. All-cash, or other financing not involving FHA, is often used to purchase UI properties, however, a special acquisition and rehabilitation loan program called FHA 203(k) is frequently an excellent source of financing for homes in this category that will be owner-occupied. Note on FHA 203(k) Financing: UI properties are generally eligible for the FHA 203(k) loan program, except condos, unless specifically noted otherwise. Also, any IN or IE property may be purchased subject to 203(k) financing, instead of 203(b), if the house and the owner-occupant Purchaser's credit justify making improvements in excess of $5,000. Through this program, a lender can provide funds for rehabilitation along with the purchase mortgage, and the rate the buyer has to pay is more attractive than a separate home improvement loan. Insurable With Conditions (May be either IN or IE listing code.) Properties that are listed either IN or IE may also have a notation in the listing that indicates "With Conditions." Typically the conditions involve having a systems check, roof inspection, or other property condition inspection as required by the appraiser to satisfy lender requirements. The inspection fees expended are a buyer's cost that may be reimbursable. Different considerations are given for these fees, according to the Region. Time Frames For Bidding New Listings are posted on Thursday of each week. Days 1 to 5 (Owner-Occupants only, first bid opening) · Priority will be given to Purchasers who are owner-occupants and non-profit organizations (NPO) for the first ten (10) calendar days after a new listing is posted. · All owner-occupant and NPO offers received during the first five (5) days of this ten (10) day period are considered as though they were received simultaneously. · During the next business day following the expiration of the first five (5) day period, the M&M Contractor will review the owner-occupant and NPO bids received electronically. We will acknowledge the owner-occupant or NPO bid offering the highest acceptable net amount. Days 6 to 10 (Owner-occupans only, daily bid openings) · If there are no acceptable owner-occupant or NPO bids during days 1-5, the M&M Contractor will open bids on a daily basis for an additional five (5) days. At each daily review, the highest acceptable net owner-occupant (or NPO) bid is selected. Bids are not opened on weekends or federal holidays, but accumulate as though received simultaneously. · If, at the conclusion of the 10-day owner-occupant and NPO period, the property remains unsold, the M&M Contractor will review all bids received during the previous ten (10) days. The 10-day owner-occupant period usually ends on a Saturday, so the review is done that next Monday. If investor bids are in, they will be considered, beginning on the 11th day. Days 11 to 45 (all bidders, daily bid openings) · In the event a property remains unsold after these bid openings, occupancy is dropped as a factor. Bids are reviewed daily, with all bids received on the same day deemed to be simultaneous. Weekend bids are opened on the following business day. Days 46 and beyond (all bidders, 5-day bid, and then daily bid openings) · When a property still remains unsold, the M&M Contractor will re-analyze the case as soon as possible. The price may be reduced, and for five days after the price reduction, all bids are considered simultaneous, with owner-occupants given priority. After the five-day initial reduced price bidding period, then bids are reviewed daily and the acceptable bid that offers the highest net value to HUD (regardless of occupancy) is acknowledged. Pre-Qualification of the Purchaser Brokers are responsible to see that prospective buyers have been pre-qualified for a loan by a lender who has issued a letter on the lender's letterhead to the Purchaser. That letter must be included in the contract package. For purposes of this program, "pre-qualification" means a loan application has been made, and a preliminary loan commitment has been obtained from a recognized mortgage lender who states that a preliminary Credit Report has been performed and reviewed. Furthermore, the letter must state that on the basis of this review, the mortgage financing for a specified dollar amount sufficient to purchase the property should be available to this Purchaser. "As-is" Policy All HUD homes are sold strictly "as-is." HUD does not make any repairs. There are no representations or warranties, expressed or implied, on the houses. HUD does not guarantee the condition of any house, FHA-insurable or not, or whether it meets local codes or zoning requirements. Purchasers must make sure the home is in the condition they are willing to accept. The HUD-92564-CN addendum For Your Protection: Get a Home Inspection must be signed at the same time as the Sales Contract. See paragraph B in the Conditions of Sale on the HUD-9548 Sales Contract, and make certain the Purchasers understand. The Purchaser has fifteen (15) days after the ratification date on the Sales Contract to have all inspections made. The Home Inspection Policy and a request form are included on the web site and must be submitted to the Property Management Center, along with a copy of the ratified Sales Contract. No fee to First Preston or Southeast Alliance is required. Utilities may be turned on at the Purchasers' expense. The selling agent must accompany prospective buyers and inspectors AT ALL TIMES prior to closing. Please carefully read, and make certain your Purchasers understand and accept all the provisions of the Conditions of Sale on the reverse of the Contract, notably Paragraph B. Results from home inspections will not be a basis for canceling a sale, except in cases involving FHA financing
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