Whether you're buying a HUD home or a traditional one, you have to be prepared. Enough money to buy a home is not the only thing you should have. Read on as we give you a rundown of the things you need to prepare when buying a HUD home.
Before buying a HUD home, you must:
1. Understand the HUD home buying process.
The first step is to understand what you need to prepare for. If you're interested in a HUD home, you should know what this process looks like. You also have to take note of the differences it has from buying a traditional home.
Here's an overview of the HUD home buying process from beginning to closing:
HUD homes are sold at auction. Unlike regular homes sold on the market, you can only buy a HUD home if you present an offer or bid. Bids from owner-occupant buyers are accepted within 30 days.
But you can't just submit bids. To bid or submit an offer on HUD homes, you must have a HUD-approved real estate agent to represent you. Once the 30-day period ends, HUD will choose what they think is the best offer. If none of the proposals are deemed high enough, they will open the bidding process for investors.
If they choose you as the winning bid, HUD will contact the REALTOR® who represents you. You will then be provided a settlement date and thirty days to close.
If you need to extend the contract or schedule a later closing date for any reason, HUD can deny that. They can also keep your money deposit, or they can charge you to change the closing date.
2. Make sure it's the right home for you.
We appreciate that buying a home is a big deal. It's a high ticket expense and not a decision to be taken lightly. This is true whether you're buying a HUD home to live in it or for investment. You can't simply get a refund or back out once your bid was accepted. That's why it's essential to make sure the HUD home you are purchasing is the one for you.
Before going through listings on HUD's website, you have to be sure about the kind of home you want. In purchasing HUD homes, it’s the buyers who take care of repairs. But, keep in mind that there are many things that repairs can't change. This includes the community where the house is or the home's proximity to places you love to go to regularly.
So, think twice before you submit an offer. List down the top things you want your house to have, especially if you plan to live in it for a long time. Know which characteristics are negotiable and non-negotiable for you.
3. Be financially prepared.
This one takes the longest preparation time. This is because you have to do this long before you actually decide to buy a HUD home. In preparing for a home financially, it is not just the cost of the house itself that you need to save up for.
Maintaining a home is more expensive than buying one. Though HUD homes are more affordable, the cost of buying one isn't that cheap. Take note that repair costs will be taken care of by the homebuyer too.
But how do you determine if you are financially prepared to buy a HUD home? If you have done the following, you are most likely ready to buy a home:
Establish your credit rating.
Pay off debts.
Save up for downpayment and repair escrow.
Have enough monthly budget for maintenance costs.
Having a good credit score will help you get approved for loans. You'll need financing, especially since HUD will not offer any repairs or improvements. As a homebuyer, you're the one responsible for financing the renovations of your HUD home. Getting approved for financing programs will help a lot with the repair costs for your HUD home.
Your deposit will typically range from $500 - $2,000. You'll probably say that's not very expensive. Actually, the more money you can put into your down payment, the lower your mortgage payments will be. So, if you have prepared enough savings, you can take advantage of paying a higher down payment to get lower monthly mortgage costs.
Lastly, check how much you can afford to pay every month for a house. Estimate your expenses. The estimate should include monthly mortgage payments, utility bills, and other maintenance costs. If the amount you can take out of your budget is lower than the total monthly expenses in maintaining a home, that means you're not yet ready.
4. Choose a REALTOR® to work with.
This last step is the most crucial part of the entire HUD home buying process. Since you will not be able to buy a HUD home without a REALTOR®, choose the best and most qualified to help you out. You have to hire a HUD-approved real estate agent before you can submit a bid. But, that isn't the only role a REALTOR® has to play in the process.
An expert's help enables you to know if the property is worth it in the first place. Your HUD real estate agent will guide you throughout the entire home buying process. Your REALTOR® will help you from the walkthrough up to the closing process. Buying a HUD home looks a little stressful, but with a professional to help you out, that should not be the case.
If you need help with buying a HUD home, call me, Nancy Braun, a HUD Certified expert, at 704-997-3794.