What is HUD and How Does It Work?

photodune-1853197-mortgage-loan-contract-document-on-lender-desk-xsThe Department of Housing and Urban Development (HUD) is a government
agency that was created in 1965 to determine policy for housing and city
planning. Today its focus is on housing while individual cities handle
development. Virtually anything that has to do with homeownership or rental
falls under its jurisdiction.

Areas of Interest for HUD

One of the primary functions of this branch of government, and the one that
most people are familiar with, is that of loan facilitator. Although it is not a
lending institution, it approves other lenders and gives them financial
backing to help families of low and mid-level income procure loans.
Practically all real estate agencies are associated in some way with this
department and can give you information on how to receive assistance with
purchasing a home.

This agency focuses heavily on education for potential homeowners. They
fund many off-shoot organizations and special programs that work directly
with American families to help them understand the ins and outs of
purchasing a home, including counseling services in the event of foreclosure,
default, renting and credit issues.

Other areas of interest for this division are safety issues, housing
discrimination, senior housing, home repair and homeowner’s insurance.
Low-income families are not the only group benefiting from these programs.
Through this agency police officers can receive approved housing at fifty
percent of market value. Let’s take a look at how such institutions work.

Public Housing Program

Public housing was created to provide safe, affordable homes to low income
families, the elderly, and disabled citizens. Structures are anything from
apartment buildings to single-family homes. Today there are roughly 1.2
million families who seek shelter here. The units are managed by Housing
Agencies (HAs) which are funded by the Department of Housing and Urban
Development. They also provide training and technical assistance in the
building and managing of these properties. The most impactful characteristic
of this system is that renters are able to pay what they can afford and no
more.

In order to qualify for housing assistance, an HA must verify your annual
gross income, the level of your specific need, and your status as a citizen or
eligible immigrant. You will also be screened based on your previous tenant
history and whether or not you will be a disservice to the overall housing
environment. In this way the agency can guarantee a controlled and
family-friendly setting for all tenants to enjoy. Income limits vary depending
on what zone the unit is located in. You may qualify at one and not another.
Basic requirements include a detailed application along with documentation
such as tax returns and birth certificates.

What Is A HUD FHA Loan?

The Federal Housing Administration is another program overseen by this
branch of government. FHA’s main purpose is to provide mortgage insurance
to approved lenders, essentially guaranteeing payment even if the borrower
defaults. This allows families who are considered high-risk to qualify for a
loan and purchase a new home.

Guidelines are set by the administration and borrowers must meet their
requirements to receive the HUD FHA loan. The property and location must
also be approved. In the event of default, the home will be foreclosed upon
and the government will pay the remaining balance of the loan to the lender,
therefore assuming the property. The homes are then sold back to qualifying
citizens and the paperwork is handled by approved agents and brokers.

The process of purchasing such a home involves the department’s real
estate agents bidding on your behalf for the property. The property owner
reviews all bids and maintenance is overseen by agencies under their
control. Homes are sold without any improvement, thus intelligent bidders
will pay for a professional home inspection to determine a fair bid.

Priority is given to potential homeowners over investors in the bidding
process, and the buyer’s broker commissions and closing costs are
oftentimes covered if this is requested in the offer. Properties are also offered
at discount prices for individuals in public service, such as teachers,
emergency medical technicians and non-profit organizations. The 203(k)
program can assist homeowners by including remodeling and repair costs
into their FHA loan and allowing them to repay it as part of their mortgage.

The U.S. Department of Housing and Urban Development is the head of a
massive network of agencies and individuals all dedicated to achieving one
goal: affordable housing options for underprivileged American citizens. Policies are ever-changing as financial downturns and economic fall-out make
life more difficult for the families of our country. All of its branches, like the
Federal Housing Administration and Public Housing Program, are firmly set in
place to safeguard every individual’s right to a secure place to call home.

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