What is the Department of Housing and Urban Development (HUD)?

HUD is a department established by  Lyndon B. Johnson on September 9, 1965. It’s main goal is to create strong, sustainable, inclusive communities and quality affordable homes. This department is used as a way to strengthen the housing market, economy, and protect consumers. It sets out to  utilize housing as a way to improve the quality of life. Here are some things you should know about this department before purchasing a home.

 Buying a HUD home

Portrait of happy family resting on bed First of all, a home from this department is typically 1-to-4 unit residential property acquired through this from the housing development as a result of a foreclosure action on an FHA-insured mortgage. The department becomes the property owner and offers it for sale to recover the loss on the foreclosure claim. Anyone who has cash or can qualify for a loan you may buy a house under this administration. However, the first claim goes to those who intended to live there on a primary residence basis. All unsold properties after this priority period are open to buyers and investors.

 How do you receive financing (FHA-insured mortgage)?

Direct financing is not provided to buyers of HUD homes. Financing must be through cash reserves or a mortgage lender. Only if you have the necessary cash or loan qualifications, may you purchase a home from this department. A federal government mortgage is a good alternative to finance your home. In this situation, the borrower needs to meet certain federal credit requirements. Under this form of borrowing, the federal government allots a maximum of 96.5% financing. Borrowers must pay annual premium and one to four unit properties are eligible under this financing.  To know your borrowing limits, contact lenders in your area.

 How to go about getting a home inspection?

Of course, you want to check out the property before you buy it. You never know what damages or pest problems were prevalent with the previous owner.  However, HUD is not responsible for defects nor provides a solution to amend the issues concerning the property. As a homeowner, it’s your responsibility to repair your home. It’s highly recommended to hire a professional inspector to check out the property to measure the issues. All occupants have to meet certain standards by the department.  If you need repairs done to your home, you can apply for an FHA rehabilitation loan, which is a Section 203(k) program in the department’s rehabilitation and repair of single family properties. Usually, a homeowner needs financing for modernization and repair, but additional funding is attainable through Section 203 (K) in a permanent mortgage.

 How does a homeowner become eligible for Section 203 (K) assistance?

The property must be a one to four family unit that’s been completed for a year. Also, the number of units must abide by the local zoning requirements. Newly constructed unit must attach to the existing home. If your home needs to be demolished or razed, it’s still acceptable for repair funding just as long as the existing foundation system stays intact. You can also convert your 4 unit home into a 3,2, or 1 unit, and vice versa.  As a result of this program, the rehabilitation process can be used in a few manners:

You can purchase a dwelling and the land and rehabilitate it. There’s an option to purchase a dwelling on another site by moving it to a new foundation on the mortgaged property and make repairs. Additionally, you’ll be able to refinance existing liens secured against the subject property and rehabilitate the home.

To learn more about a 203k Loan click here.

 Changes in HUD for 2014 regarding Home Equity Conversion Mortgage (HECM)

Like many programs for housing, this department is no different in changing policy. The administration will help borrowers who have fallen in technical default as a result of lack of funding for paying property taxes, homeowners insurance and other property requirements. As a way to assess homeowner  financial issues, the department is finalizing guidelines that lenders must follow regarding monetary issues of prospective borrowers. Lenders must view all income sources of borrowers such as

pensions, Social Security, IRAs 401(k) plans, and credit history. If you have sufficient funds leftover from paying living expenses, the lenders will excuse you from a set-aside fund (a certain amount of funds from your loan to pay future charges such as property taxes and hazard insurance payments). If your set-aside funds run out, you must continue paying property charges using any funds you have at your disposal.

Prospective homeowners should utilize resources and research all possible avenue before buying. If it’s a property you seek, make sure to inspect the property with good professional who will ensure you abide by homeowner requirements mandated by the housing administration.

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