To help more people achieve the American dream of home ownership, the U.S. government offers several mortgage loan options with benefits such as lower interest rates and low or no down payment requirements. Even with the extra help, sometimes homeowners still default on their government-backed loans and the homes end up as HUD homes, repossessed by the U.S. Department of Housing and Urban Development. HUD often resells these homes under market value, meaning a good deal for other home buyers, as long as they can fulfill certain HUD home requirements.
Anyone may purchase a HUD home, as long as he qualifies for a mortgage or has cash to make the purchase. HUD employees also qualify to purchase HUD homes but must first receive written permission from the Director of HUD's Office of Single Family Asset Management. First priority for HUD homes goes to owner-occupants who will be living in the home, but if no owner occupant purchases during the first bid period, investors many then bid on the HUD home.
Purchasing a HUD home requires the buyer to use a real estate agent when making an offer. Buyers must use an agent with an active name and address identification, or NAID, number HUD uses to track the sales. HUD issues NAID numbers only to brokers, nonprofits and government agencies. In addition to an NAID number, agents must register and create an account with the HUD Home Store before making a bid for a client.
Unlike buying a traditional home, buyers must purchase HUD homes through an online auction, the HUD Home Store. Only agents or brokers with the proper NAID number may bid on the homes during the offer period, and buyers can only submit offers through an NAID-certified agent during the offer period. After the offer period expires, if the buyer is the highest bidder, his agent has two days to submit the signed offer and any addendum documents to the home's asset manager.
After both parties sign the purchase agreement, HUD gives the buyer a closing date 30 to 60 days from the date of the signed agreement. Before this date, the buyer must secure his financing, schedule any inspections and fulfill the conditions and terms of the purchase agreement. Additionally, if the buyer wants HUD to pay his real estate agent, he must write that into the original purchase agreement or include it as an addendum before the closing.
Buyers purchasing HUD homes may have an independent inspection of the property, but HUD will not make any repairs to HUD homes. HUD requires buyers to schedule any inspections within 15 days from the date both parties sign the purchase agreement. If the buyer finds issues he does not want to repair, he has the option of opting out of the sale, but he must include an inspection clause in the original purchase agreement. If a buyer uses a Federal Housing Administration Loan to buy a HUD home, the FHA requires HUD to pay up to $4,000 to remedy any lead paint in houses built before 1978.
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