Qualifying for a HUD Home

Qualifying for a HUD Home
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Are you interested in qualifying for a HUD home? Here are great tips and resources for not only finding a HUD home, but also different loan programs offered and what you will need to prepare prior to your loan application.

What is a HUD Home?

When a homeowner defaults on an FHA mortgage, the Department of Housing and Urban Development (HUD) pays the FHA lender and then becomes the owner of the home. Homes that are owned by HUD are listed and sold to just about anyone who qualifies at market value price.

HUD homes come in all price ranges, however, most are considered to be affordable for the average American, even low-income families. Most HUD homes must be owner-occupied to qualify for an FHA mortgage.

Qualifying for a HUD Home

While HUD is not a mortgage lender, they do insure FHA loans from approved lenders or mortgage companies. To qualify, HUD and the FHA offer these tips to help you find and qualify for a HUD home:

  • FHA Approved Lender - First, find an FHA approved lender. You can get a list of HUD approved lenders from their website. Your bank may be an FHA approved lender as well. Once you find a lender for the HUD home you wish to purchase, you will need to provide information and personal history as required by HUD.
  • Employment - You should have been at your job for at least two years. Job stability is also important to HUD and the FHA.
  • Income - An FHA lender will look at your income to see if it is steady, reliable, or has increased regularly.
  • Bankruptcy - You can still qualify for a HUD home if you have filed bankruptcy, however, the bankruptcy should have been discharged at least three years prior to your loan application.
  • Credit Worthiness - FHA lenders will look at your creditworthiness to ensure you pay your bills on time and are considered a good credit risk.
  • Required Documents - If you are interested in buying a HUD home, it's best to have all of your documentation together to aid the lender in completing your loan application. You will need to provide address history for the last two years, the name and address of employers, salary and wages, and wage statements from your employer(s) or W2s. FHA lenders will also ask for a copy of your personal tax returns for the last two years. If you are a veteran and wish to purchase a HUD home, you may also be asked to provide your DD 214, which is an official record of your military service upon discharge.

What Loan Programs Are Offered?

Once you have qualified to purchase a HUD home, some of the loan programs offered are:

  1. 203(b) Fixed Rate Mortgage - This program is offered through the FHA and usually requires a small down payment and low closing costs. HUD will insure the loan for up to ninety-seven percent, however, you must have a good debt-to-income earnings ratio.
  2. Good Neighbor Next Door - These HUD and FHA loan programs are offered to teachers, law enforcement officers, emergency medical technicians, and firefighters.
  3. Public Housing Renters - Another HUD program is designed for public housing residents who want to turn rental payments into a mortgage. You can contact your public housing authority for more information or visit the Public Housing web page.
  4. Native American Section 184 - This program is geared toward Native Americans and Alaskan Natives. You can find out about participating tribes and requirements from the Section 184 web page.

Useful Information from HUD and the FHA

The FHA offers tips and frequently asked questions on qualifying for a HUD home, where to find listings of HUD homes, and the process to purchase one. A visit to the HUD loan website will give you tips on how to find a HUD home and includes nine steps to buying a HUD home. Read the information from both of these government agencies or contact an FHA approved lender to find out more about HUD homes and loan programs.

Qualifying for a HUD Home