by Winnie Saunders
Home foreclosures are hitting record highs every month and more home owners are falling behind on their payments each month. Many of theloans used to purchase these homes originally were insured by the Federal Housing Administration or “FHA” for short.
Most people don’t realize that FHA doesn’t actually lend any money. In order to encourage lenders to grant more home loans, FHA guarantees that as long as a loan was underwritten according to FHA guidelines, the lender will not lose money if the borrower defaults on the loan.
When lenders foreclose on FHA insured mortgages, then HUD(U.S. Department of Housing & Urban Development) pays off the loan and becomes the new owner of the home. As a result, every month the government has thousands of homes to auction off to the highest bidder.
The first step to take if you would like to get a great deal on a HUD home is to find an FHA approved lender and get a mortgage pre-approved. Many HUD homes sell for great prices, but HUD will not accept a bid unless the buyer has proof they have been prequalified for a mortgage. In addition, getting pre-qualified prevents you from falling in love with and making offers on homes you cannot afford.
The second step toward finding the best deal on a HUD home is to find a real estate agent who specializes in selling HUD homes. Many agents make their entire living only selling HUD homes. These specialists have seen every weird procedure the bureaucrats can throw at them and they have ready solutions. The average real estate agent rarely deals with HUD on a foreclosure home.
The process is very different from the normal home buying process, so it pays to hire a specialist. In addition, a good real estate agent can help make sure you are up to date on all the recent sales in the area where the homes you are interested in are located. Home values are still falling in many areas and you don’t want to get into a home and owe more than it is worth within a few years.
All the HUD homes for sale each month are listed at HUDHomeStore.com and the public can search them by area, price range, status (whether the home is available to only owner occupants or to investors as well, or it has been reduced in price, etc.) and even the specific address.
However, an experienced agent is already familiar with most of the homesavailable each month and has probably even been inside many of them. Because HUD homes have been owned by people in dire financial condition, many have deferred maintenance issues the previous owner could not afford to take care of.
HUD often sells these homes without making any repairs. Your agent can help make sure you don’t bit off more than you can chew in this regard.
Many great deals are available when buying HUD foreclosure homes. However, unless you are an experienced real estate investor, your best option for finding the right home for you is to hire a real estate agent who specializes in selling HUD homes.