What Is the Best Way to Finance a HUD Home?
FHA financing is the best way to finance a HUD Home for most buyers.
FHA has certain advantages over conventional financing:
HUD Homes offered with FHA financing offer special incentives to buyers. HUD Homes eligible for FHA 203(b) financing have reduced closing costs because there is NO APPRAISAL fee. Lenders are required to use the appraisal that HUD has on file if the appraisal is less than 150 days old. (If you sell a HUD Home near the end of the 150-day window, you can make a written request to HUD to extend appraisal validity 30 days, to 180 days. That request must be in writing two weeks before the 150 day appraisal expiration date.)
Keep in mind an important fact about FHA financing for HUD Homes:
FHA will only finance a maximum loan amount that corresponds to HUD’s asking price. If a buyer is inclined to “bid up” a property and finance that property with FHA financing, he will have to make up the difference between the asking price and the bid amount with additional down payment monies.
For instance: A buyer expects that there will be competing bids for a house at 123 Main Street. HUD’s list price is $85,000. The buyer is confident that the real value of the property is closer to $100,000. He bids $90,000. His down payment will increase from 3.5% of $85,000 ($2,975 down payment) to that amount PLUS an additional $5,000 ($6,912 down payment).
I know that I mentioned this in my last blog, but here is a good primer on searching for a loan for your new home. Click here for the video.
Remember if you want a list of already approved HUD Homes or have in mind a conventional purchase using FHA financing, give me a call at 610-737-2310 or email me at email@example.com. Start your search on the right at the Lehigh High Valley link.
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