HUD homes are among the cheapest housing options, but they are also the hardest to acquire. There are several processes and regulations to follow, and applicants must be aware of the various eligibility criteria and documentation required to apply. Even if applicants find a HUD home nearby, they must thoroughly know the purchase process. Knowing the details will help them submit a strong application and improve their chances of successfully acquiring the property.

What are HUD homes?
A HUD home is initially owned by someone who used FHA-insured mortgages to finance their purchase. When they default on the loan, the U.S. Department of Housing and Urban Development forecloses on the house under its program. The government then owns this home. It is put back on the market for resale to recoup some of the losses incurred on the non-payment of the loan.

All of the HUD houses for sale are sold without the guarantee of zero defects. They have to be purchased “as-is.” There is no repair work done before these are put up for resale. This is why these houses are also known as fixer-uppers.

This is also a reason why HUD homes cost less. The house’s appraised value is determined by considering the range of required improvements. This reduces the house’s overall price, making it suitable for many first-time home buyers, especially those with low or moderate incomes.

Tips for finding HUD homes

• Start by browsing through the official website of the HUD Home Store. You can search for HUD homes for sale near you through the “Search Properties” tab.
• Also, you can expand your search to look for HUD houses for sale across your state or within a specific market by using a postal or city code.
• Make sure you check the HUD store every day. Since these homes sell pretty quickly, the listings keep changing daily. So you will have to check for new listings every day until you find one you like.
• You can also hire a HUD-approved agent to look for listings on your behalf. They can also help you bid on the house that you like.

Eligibility criteria for HUD homes
The eligibility criteria for any HUD foreclosures near you will be uniform across all states. However, contact your local federal government representative office or agency to learn about the various terms and conditions involved in the eligibility process. In most cases, the eligibility criteria will be as follows:

• You should qualify as an elderly person or a person with a disability.
• You should have U.S. citizenship or eligible immigration status.
• If you live in substandard housing, you may be eligible.
• You may be eligible if your household spends more than half its income on rent.
• Your annual income cannot exceed 80 percent of your city’s or town’s median income. This may differ based on where you are located.

Documents required to apply for HUD homes
Once your eligibility checks out, you will be added to the waiting list for HUD homes. Since these homes are affordable, the waiting lists are quite long. So while you wait to reach the top of the list, you can start to prepare all the documentation that will be required. Here are some basic documents you must submit during your application process:

• You will need the last four consecutive paychecks, or a notarized statement that shows proof of your income.
• You will need to submit your social security award letter.
• You will be required to submit your most recent bank statement.
• For every household member, you will need to submit birth certificates.
• For every household member, you will need to submit social security cards.

How to finance HUD homes
The cost of HUD homes is affordable. But you may still need financial assistance through mortgages and loans. While all HUD homes have been financed using FHA loans, it is unnecessary for you, as a new owner, to buy your HUD home through an FHA mortgage.

However, it will be easier for you to qualify under this mortgage program. That said, it may be easier to qualify under that loan program. This is because this program has flexible mortgage approval regulations for those with low credit scores and income. Moreover, it helps if you are a first-time home buyer.

However, financing the cost of a HUD home with an FHA loan will require you to pay mortgage insurance for the entire life of the loan. But you can cancel the mortgage premium by refinancing and converting it into a conventional loan.

Also, you can consider applying for the FHA 203(k) program to cover the costs of HUD homes. This program also offers coverage for renovation costs. This is especially helpful since several HUD homes usually require major repair and renovation work because they have been unoccupied for a long time.

Other financing options to cover the cost of HUD homes include the following. All of these have affordable downpayment options. Check them out:

• VA loans with zero down payment
• USDA loans with zero down payment
• Conventional loans with as little as a 3% down payment