Who is eligible to buy a HUD Home?

The US government advocates homeownership / HUD homes for all as one of its vital national policies. It has created several plans and programs to facilitate buying a HUD hom

This policy is partly to help low-income families aspire to property ownership and look forward to a more optimistic future. It also helps increase social benefits associated with the pride that usually goes along with owning property assets. The expectation is that a community of homeowners will create a more stable and better looked after community.

HUD homes are properties that have been repossessed or taken back from the mortgagee (the person initially securing a loan to buy it) by the FHA. In reality, any buyer who has the funds or can qualify for a loan is eligible to purchase a HUD home. However, there are some terms and conditions which need to be observed or complied with when buying a HUD home.

Buying a HUD home

  • Owner-occupier buyers have the first preference in buying HUD homes; that is, buyers who plan to make these homes their primary residence. When the bidding process to acquire a HUD home begins, 30 days is allowed when only owner-occupiers may bid. Another condition is that such buyers may not have purchased another HUD home in the last two years and must live in their newly purchased home for at least one year;
  • Investors may also buy HUD homes. Investors usually refer to buyers who may either tidy up and/or partially or fully renovate the property before selling it on or renting it out. They do not intend to live in the property and may acquire a HUD property to renovate and sell as their full-time business.

Investors can only bid on HUD homes after the initial 30 day period reserved for owner-occupiers, as offering homes for owner-occupiers is one of the critical objectives of HUD's policy.

Other types of people who may be eligible to buy a HUD home and who may qualify for special privileges include:

  • Community workers such as police officers, teachers, firefighters, and emergency services personnel. They must agree to live in the property for at least 36 months and will be eligible for a 50% discount on the purchase price: the so-called "Good Neighbour Next Door" loan;
  • Prospective buyers of homes in community areas being rejuvenated and upgraded (in these cases, the loan may also extend to providing funds for the renovation works;
  • People with lower credit scores or who have difficulty saving up for a home down payment can usually obtain a loan from the FHA;
  • Current and former service members who can purchase HUD homes at steep discounts to market prices with so-called "VA loans";
  • Participants in government-backed schemes such as the Housing Choice Voucher (Section 8), One Dollar, Non-Profit, or HUD $100 Down Programmes are eligible to buy a HUD home.

Apart from the above alternative sources of special loan funding, almost all buyers should be able to purchase a HUD home with a typical mortgage provided by government-backed entities such as Fannie Mae or Freddie Mac.