A HUD home is a house being sold to the public by the U.S. Department of Housing and Urban Development. HUD homes are foreclosed properties whose original owners defaulted on their FHA mortgage. These homes have since been reacquired by the government, which typically wants to sell them quickly — resulting in a potential bargain for a buyer. HUD homebuyers should note that the deal may come with certain requirements or contingencies. Let’s take a closer look.
What is a HUD home?
The Department of Housing and Urban Development backs and administers programs that provide fair housing opportunities for all. That includes the Federal Housing Administration (FHA), which provides mortgages with lower down payment and flexible credit requirements, as well as the “HUD home” program that resells foreclosed houses.
The listing price for a HUD home is typically lower than comparable properties in the area because the goal is to recover the losses from the foreclosure, rather than profit from a sale. This resale may provide a more accessible opportunity for first-time buyers, as well as middle- and lower-income homebuyers. Outside of their competitive price tags, HUD homes are uniquely accessible because they typically begin by accepting owner-occupant offers only or offers from someone who plans on residing there full-time, for at least 12 months.
How do you buy a HUD home?
Instead of being found on a multiple listing service (MLS) like most other homes, HUD homes can be found on HUD's official website by filtering for your desired location and exploring homes available.
If you find a home you’re interested in, you’ll need to make an offer and submit an earnest money deposit through a real estate agent or broker who is registered with HUD and is participating in the HUD Homes program. You can find a HUD-registered agent through HUD's official website as well.
As mentioned, there is typically an initial bidding period (usually around 5-30 days) that’s meant for owner-occupant offers only. This is done to avoid HUD homes landing in the laps of investors, and defeating the goal of providing affordable housing opportunities. If your offer is accepted, you'll receive a time frame (typically about one to two months) to complete the purchase. Once the owner-occupant bidding period is over, investors may make offers.
If your offer is accepted, the next step is typically a home inspection. A home inspection may help inform your decision on whether to move forward with the purchase. If the home inspection uncovers a potential deal breaker, you’ll have the opportunity to withdraw the offer before the deadline passes (or risk losing your deposit).
If you do decide to move forward after the inspection, you’ll finish securing your mortgage. If you’re looking for mortgage or closing cost assistance, the FHA may have options worth exploring or you could speak to your lending agent to see if there are programs you might qualify for. HUD homes may be purchased with conventional or FHA mortgages, depending on personal and financial qualifications, and do not necessarily require a HUD mortgage.
A HUD home is a home previously owned by an FHA borrower that went into foreclosure and was reacquired by the government. The home is put back on the market so HUD can recover losses from foreclosure quickly. Due to the nature of the sale, HUD home listing prices are often lower than comparable homes in the area, making them more accessible for low- to middle-income buyers. You can find HUD homes for sale on HUD’s official website, and they may be purchased with a variety of mortgage types, depending on your personal circumstances.