Dallas Fort Worth Area Homes and Real Estate: HUD Homes for $100 Down | Dallas Fort Worth Area Home Buyer Information

HUD has continued to promote their HUD $100 down program for home buyers in the Dallas Fort Worth area.  The program is a great opportunity for home buyers to get into a HUD Home without having to pay the normal 3.5% down payment that is required for FHA loans.

HOW DOES THE HUD $100 DOWN PROGRAM WORK?

There are some specific guidelines that have to be followed:

• The buyer must obtain FHA financing in order to get the HUD $100 Down. 
• The buyer must intend to occupy the property.  HUD does not allow the $100 Down program for investors or for buyers that will not otherwise occupy the home.
• The buyer must submit a minimum bid for at least the list price.  Offers submitted below the list price do not qualify for the HUD $100 Down Program.
• Buyers may bid more than the appraised amount of the property, but must pay the difference between that and the offer price, plus the $100 in cash at closing.
• The program follows all of the other general requirements of purchasing a HUD Home. 
  

Home buyers interested in purchasing a HUD home should consider working with professionals that have prior experience with HUD Homes because of the complexity of the transactions.  HUD has very specific guidelines regarding their bidding process, the earnest money, home inspections, the closing process and situations where the property may need additional repairs.   

Buyers who are interested in bidding on a HUD Home and taking advantage of the HUD $100 Down program can contact me for a list of qualified HUD Homes in their area.  I have past experience with this program on the lending side and also as a full time Realtor(R).  Although I am no longer a licensed loan officer, I can help you find a lender that is experienced with HUD transactions.       

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WHAT IS A HUD HOME?

A HUD HOME is a foreclosure where the previous owner had an FHA loan and the lender negotiated with HUD to take over liquidation of the property.  It is essentially no different than any other foreclosure, except HUD allows certain incentives, such as the HUD $100 DOWN PROGRAM, since they are both the seller and the loan guarantor in cases where the buyer is obtaining FHA financing.

HOW MUCH ARE CLOSING COSTS WHEN BUYING A HUD HOME?

The closing costs vary depending on the type of loan the buyer obtains, the total origination charges a buyer chooses to pay relative to their interest rate, as well as other factors determined by how their loan is structured.  Other prepaid items, such as insurance and taxes, will affect a buyer's total out of pocket costs at closing.  Only a qualified loan officer can answer this question on an individual basis.  Contact me and I can put you in touch with a lender that's experienced with HUD homes. 

HOW LONG DOES IT TAKE TO CLOSE ON A HUD HOME?

HUD's contract automatically allows for up to 45 days from the time the contract is executed.  In my experience, buyers should expect closing to take up to this long in most cases.  HUD's closing agent typically requires documents as much as eight business days in advance of the closing date.  This alone means that closings will typically take at least two weeks longer than non-foreclosure transactions.  With all the new Federal rules in place that require waiting periods on loans, this can add up to several extra days. 

In the event a closing is delayed past the normal 45 day closing window, HUD may allow for an extension.

I'VE HEARD THAT ALL HUD HOMES ARE IN POOR CONDITION.  IS THIS TRUE?

Not at all, although some are definitely in various states of disrepair.  Unfortunately, some foreclosures are in this state because the previous owners could not afford to maintain the home.  And in some cases, home owners who knew their home was going to be foreclosed may have vandalized it or stripped the home of appliances and other loose items, such as ceiling fans and light fixtures, before they moved out.  The condition of the home, as is the case with most foreclosures, is often factored into the asking price.  In some cases, the discount on the sales price over current market value may be more than enough to cover needed repairs, improvements and upgrades and still leave the buyer with some equity.  Every situation is different, and the market value of homes in all areas is always a moving target. 

DOES HUD ALLOW FOR A HOME INSPECTION?

Yes.  HUD has a specific policy regarding home inspections for owner occupant purchasers.  In order to obtain an inspection, a buyer must request this in writing and have their agent submit to HUD's asset  manager within 15 days of an accepted offer.  The buyer is also responsible for turning on all utilities necessary to complete the home inspection. 

In general, HUD will either allow items in need of repair to be escrowed into an FHA loan, or they may discount the price of the home in some situations.  However, they will not allow buyers to escrow items that have been marked as "deficient" on the property condition report unless an escrow amount for these items was already determined and included as part of the list price.  So the bottom line is that buyers should read over the property condition report and make sure they are OK with items marked as "deficient" because there is usually no way to go back and ask for these items to be fixed after the fact. 

In many cases, HUD will have already alotted for a repair escrow on certain items that the property condition report has marked as in need of repair.  For example, if HUDs property condition report shows a faulty front door, they may have already stated in the bid that they will allow a repair escrow of $500 to cover fixing the door. 

CAN I PURCHASE A HUD HOME MYSELF WITHOUT USING A REAL ESTATE AGENT OR BROKER?

There is no way purchase or even bid on a HUD Home without using the services of a licensed real estate agent or broker.   Buyers who wish to purchase a HUD home should storngly consider working with an agent that is experienced with HUDs because the transaction is somewhat different from one where the seller is an individual.  HUD also has very specific guidelines and deadlines for not only the contract, but certain other addenda, the home inspection process, requesting repairs, receipt of earnest money by the closing agent and also the  

WILL I HAVE TO PAY MONEY OUT OF POCKET TO USE THE SERVICES OF A REAL ESTATE AGENT OR BROKER WHEN BUYING A HUD HOME?

NO.  The agent commission is paid by HUD directly to the real estate broker.  The buyer pays nothing out of pocket for this. 

WHAT HAPPENS IF THE HOME INSPECTOR DISCOVERS A PROBLEM THAT WAS NOT DISCLOSED ON HUD'S PROPERTY CONDITION REPORT?

In these cases, a buyer can petition HUD to allow for a repair escrow if they are obtaining FHA financing.  The buyer's lender must also agree to this as well and they must also submit a written request to HUD.  HUD will then assess the report and decide whether or not to allow the escrow.  In cases where the total amount of repairs are less than $5,000, HUD will allow this to be structured as a "203B with escrow" loan.  In this case, the work is compelted after closing and both the buyer and the contractor are issued a check.  The buyer typically endorses the check and gives it to the contractor to cash as payment for their services.

However, in cases where the total amount of repairs exceed $5,000, the loan must be restructured into a 203K loan.  A 203K is an FHA loan with a repair escrow of over $5,000.  The 203K loan process is a bit more complex than a simple 203B with a repair escrow.  Also, only a handful of lenders in the Dallas Fort Worth area handle 203K loans. 

IN EVERY CASE, I recommend buyers conduct a full home inspection.  My experience has been that the property condition report sometimes overlooks certain items that may be in need of repair.  DO NOT EVER CONSIDER HUD'S PROPERTY CONDITION REPORT TO BE THE SAME THING AS A HOME INSPECTION!  HUD CLEARLY STATES ON THESE REPORTS THAT THEY ARE NOT HOME INSPECTIONS AND ARE MERELY MEANT TO SERVE AS A GENERAL GUIDE TO THE OVERALL CONDITION.  THEY ARE NOT NEARLY AS THOROUGH AS A HOME INSPECTION. 

I have experienced some cases where a property condition report missed items that were defective - the most recent case was a HUD home that had TWO defective HVAC units that the property condition report stated were functioning normally.  In this case, we were able to successfully petition HUD and the lender for a repair escrow to pay for a new HVAC, which was escrowed and installed after closing.  So in the end, it all worked out.  But if the buyer had neglected to perform a home inspection, they would have had to come out of pocket with several thousand dollars in expensive repairs. 

Contact me at (972) 978-3553 or email me for more information on HUD homes and the HUD $100 Down Program for Dallas / Fort Worth area home buyers.