HUD offers an array of FHA insured and direct mortgages. Be aware that you don’t have to make decisions on your own about how to buy a home. A HUD approved Housing Counselor can advise you about the different types of mortgages available. Find your local Housing Counseling Agency here.
The Consumer Financial Protection Bureau (CFPB) also has a nationwide list of Housing Counselors, found here.
If you want to proceed on your own and apply for an FHA mortgage, HUD also keeps a list of FHA Mortgage Lenders that can be found here. (Note: When accessing this list, do not put in a name of a bank, just put in city, state and zipcode to get a complete list of all lenders in your area.)
Here are some of the different types of HUD Mortgages that might be available to you:
The Federal Housing Administration (FHA) is part of the Housing and Urban Development (HUD) department of the federal government. The FHA does not directly offer a mortgage loan unless you are Native American, but insures mortgage loans made with FHA-approved banks and lenders.
FHA insured loans will have lower down payment requirements and lower income standard qualifications. FHA insured mortgages can be used to buy single family homes, condos (as long as the unit is on the FHA condo list and will be your primary residence), and manufactured homes.
FHA insured mortgages require a 3.5% down payment for buyers with a credit score of 580 or higher. For buyers with a credit score below 580, the buyer would need to have a 10% down payment.
If you or your family members have fix-it-up skills, Section 203(k) might be a good fit for you. 203(k) is an FHA insured mortgage that covers the purchase of a home that is at least a year old and needs at least $5000 of repairs.
Part of the total loan is used to buy or refinance a home and the rest of the money is used to fund the rehabilitation of that home. The total value of the property must fall within the FHA Mortgage Limits for your area.
Funds from the loan used to pay for the repairs are released as needed. Be aware that lenders may charge additional fees including preparation of architectural documents and the review of rehabilitation plans. The 203(k) loan will have a higher interest rate and involves heavy paperwork and follow up inspections. This type of loan takes longer to complete than a regular FHA insured loan.
According to the FHA, the types of improvements that buyers may make, using Section 203(k) financing include:
The FHA requires that properties financed under this program meet certain basic energy efficiency and structural standards. Also, you have to live in the home for at least 12 months.
The Housing Choice Voucher program has a homeownership program where a buyer can purchase a home and use their voucher to pay the monthly mortgage payment for up to 20 years.
The buyer has to have a valid Housing Choice Voucher to participate in the HCV Homeownership program. However, the buyer may be newly admitted to the HCV program or be an existing Housing Choice Voucher holder.
Many Public Housing Agencies pair this program with their HCV Family Self-Sufficiency program (FSS) for participants who want to purchase a home.
Housing authorities have the option to offer the Homeownership Voucher program or not. Many have opted to not offer the Homeownership Voucher program.
To purchase a home using the HCV Homeownership program, the buyer is required to:
The housing authority will review mortgage terms before authorizing homeownership assistance. The Housing Authority may disapprove the proposed mortgage if the debt is determined to be unaffordable, or if the Housing Authority determines the lender or the loan terms don’t meet Housing Authority qualifications.
In making this determination, the Housing Authority may review the buyer’s other family expenses, such as childcare, unreimbursed medical expenses, homeownership expenses, and other family expenses as determined by the PHA.
In addition, the buyer must sign and abide by the Statement of Homeowner’s obligations found here: Statement of Homeownership Obligations
There will be other rules and stipulations that are specific to your particular Housing Authority.
How to apply for a Housing Choice Voucher (HCV) Homeownership Voucher
HUD’s list of housing authorities that are administering Homeownership Vouchers can be found here. Note: Not all housing authorities on that list issue new Homeownership Vouchers. Some housing authorities continue to administer the program for existing homeowners, but have stopped offering the program to new buyers.
Contact a Public Housing Agency to confirm if the Homeownership Voucher program is available. A directory of Public Housing contact information can be found here.
FHA approved banks can make loans to finance the purchase of a manufactured home and/or lot. The FHA insured loans must be fixed rate loans and are generally for 20 years. The home must be used as the principal residence of the buyer.
The FHA requires the manufactured home to comply with the Model Manufactured Home Installation Standards, and all applicable state and local requirements governing the installation and construction of the manufactured home foundation system.
If a buyer is interested in purchasing a unit in a Public Housing development or to purchase a home owned by a Public Housing Agency, the best first step is to contact the agency and ask if they have a Public Housing Homeownership program.
How to apply for Public Housing Homeownership
Contact a Public Housing Agency to confirm if the Public Housing Homeownership program is available. A directory of Public Housing contact information can be found here.
The HOME Ownership assistance program is available to a buyer seeking to purchase an existing home, build a home, or purchase and rehab an existing home.
To be eligible, the buyer’s annual income must not exceed 80% of the area median income (AMI) which is the household income for a median or middle-income family in a specific area.
HUD Homes are homes for sale that were financed through FHA insured mortgages, but payments were not kept up and the homes became foreclosures.
The first fifteen days from the date the HUD home is listed, buyers looking to occupy the home can bid to purchase the home. Be aware, you will be bidding against other buyers who might be able to afford higher bids. You will make your bid using a HUD registered closing agent or broker. After the first fifteen days, investors, flippers, and landlords looking for rental property, may also bid for the home.
The homes are generally in need of repair. Usually some minor repairs are needed, but some major repairs might be needed too.
More information about HUD homes can be found here: HUD Homes for Purchase Information
A list of HUD registered closing agents can be found here: Find a HUD Registered Closing Agent
A list of HUD registered brokers can be found here: Find a HUD Registered Real Estate Broker