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Financing Options

FHA Financing:

FHA financing is available for HUD home purchases and the FHA home loan program offers many advantages that homebuyers may want to consider when purchasing a HUD home. These include:

• 0-3% down payment (instead of traditional 5%)
• Lower monthly mortgage insurance than conventional financing
• Maximum 1% loan origination fee
• Controlled closing costs
• Termite report and clearance is required on all purchases
• Property must meet FHA minimum conditions standards

More information about FHA loans is available at http://www.hud.gov/offices/hsg/sfh/insured.cfm

IN - INSURABLE: 203(b)

Properties listed IN qualify for FHA 203(b) financing. Minimum Property Standard (MPS) repairs unnecessary.

IE- INSURABLE WITH ESCROW: 203(b) with Repair Escrow

• Properties listed IE are eligible for FHA financing with repairs to be completed by the purchaser after close of the transaction. These MPS repairs must total less than $5,000. MPS categories include: structure, roof and mechanical systems, such as plumbing, electric and heating. A list of actual repairs and estimated cost appears with the property information.
• The repair costs are not paid by HUD. The buyer must finance the repair escrow amount in their FHA mortgage. Until the repairs are completed, the lender holds the "repair escrow" funds. The lender is then responsible for inspecting the repairs and authorizing release of funds.
• On the sales contract the repair escrow amount is not deducted from the Net to HUD nor added to the purchase on line 3. The repair amount should only show on line 4.

REPAIR ESCROW ONLY APPLIES TO FHA FINANCING - Not relevant with conventional financing.

UI - UNINSURABLE : 203(k)

Properties listed UI generally are in need of repairs in excess of $5,000 and may qualify for a FHA 203(k) or the new 203(k) streamlined rehabilitation loan for owner/occupants only.

Overbidding the List Price with FHA Financing

All HUD properties are listed with FHA "AS-IS" appraised value. If you are obtaining FHA financing and have bid more for the property then the appraised value then the difference must be paid in cash. This is because FHA will not insure a loan for greater than the appraised value of the property. The purchase price for the property cannot be changed after the bid has been accepted.

Cash or Conventional Financing

Purchaser is paying cash or applying for conventional or other financing not involving FHA. Any non-FHA financing is considered a conventional loan. Conventional loans are not insured by the Federal Housing Administration.

Pre-Qualification of Purchasers

Broker/agents are responsible to see buyers have been pre-qualified for a loan by a lender. A pre-qualification letter on the lender's letterhead must be submitted with the sales contract package.