What Is a HUD Home? A Bargain With One Huge Catch
If you’re hoping to score a deal while house hunting (and who isn’t?), one bargain-basement option well worth exploring is a HUD home. So what is that exactly? Simply put, a HUD home is a property owned by the U.S. Department of Housing and Urban Development, but there’s some backstory here, so allow us to explain.
Long before a home becomes the property of HUD, it typically was owned by a regular homeowner who’d made this purchase with an FHA loan. Federal Housing Administration loans are easier to qualify for than a conventional loan because the FHA requires a low down payment (as little as 3.5%). However, if the owner ends up unable to pay his monthly mortgage, he ends up in foreclosure on the FHA loan, which means the home goes to HUD, which then must figure out how to unload this real estate and make back its money.
That’s where you come in! The process of buying a foreclosed HUD home varies from a conventional sale in a couple of ways, so here’s what you’ll want to know before you venture down the HUD real estate path.