If you want to buy a HUD owned home for 50% of it's appraised value and with a $100 down payment, you need to know about the Good Neighbor Next Door program. HUD's stated purpose for this program is "to make American communities stronger, promote home ownership, build a safer nation, and take an active role in the revitalization of cities."
This program is only available to a select group of people. Specifically, law enforcement officers, teachers (PreK-12), firefighters, and emergency responders (EMTs). These are urban loans and various rules apply to different state and locations based on the local economy and infrastructure. One rule that applies to all of these loans is that the buyer must live in the home as a primary residence for at least 36 months. After that, the home can be sold for a profit. Also, the buyer is required to sign a "quiet second mortgage" for the other 50% of the appraised value. There are no payments and not interest charged on the second mortgage as long as the buyer complies with the requirements of the sale. Mainly, that they occupy the home for at least 36 months.
The 50% discount to the appraised price means that qualifying buyers can purchase a $100,000 home for $50,000. HUD doesn't carry the loan, HUD only guarantees it. However, if the buyer qualifies for any FHA loan program, the down payment required is only $100 and closing costs can be financed. The buyer can finance using FHA, VA, conventional mortgages, or cash. Additionally, if the house needs repairs or improvements, it may qualify for FHA's 203(K) or the new 203(K) Streamline Mortgage program. These loans wrap the purchase price and the cost of improvements into a single loan with a single mortgage payment.
If more than one qualifying person makes a purchase offer, the winning bidder is determine by random lottery. With the strict qualification rules, the chances of being the only qualified buyer are good. Even if three qualified people apply, the chance of winning is still 33%. One catch is that you need to act fast. HUD houses being brought on the market are only available to the Good Neighbor Next Door program for seven days before going on to the general market.
You have 30, 90, or 180 days to move into the home you purchase, depending on HUD's determination of the condition of the home and the level of repairs that may be required, if any. These HUD homes are located in designated Revitalization Areas. There are hundreds of Revitalization Areas located across the United States. These include single homes, townhouses, and condominiums. If your employment as a law enforcement officer, teacher, firefighter, or emergency responder is discontinued, you will continue to owe only the 50% discounted price but still must complete the 36 month residential requirement.
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Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.