Financing Options for HUD Homes

Expanding your home search options to include HUD homes can open a world of possibilities, especially in areas where inventory is low and demand is high. A HUD home is when a government-insured loan from the Federal Housing Administration (FHA) gets foreclosed and the Department of Housing and Urban Development (HUD) pays the defaulted loan off, and then puts the home on the market. Here we’ll breakdown various financing options that may help get you into the home of your dreams!

It’s important to understand that the HUD itself does not provide financing. You will need to obtain financing through a bank or mortgage lender. Since many HUD Homes are eligible for FHA-insured mortgage loans, this can make financing easier to obtain.

Fixed-Rate Mortgage
With a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which is usually 15 or 30 years. Your principal and interest payment remain stable, making it easier to plan a monthly budget. However, initial interest rates tend to be higher than with other types of loans.

Adjustable-Rate Mortgage
With an ARM, your interest rate and monthly payments start out lower than with a fixed-rate, but your rate and payments can change either up or down, depending on where interest rates, in general, are going. If interest rates are going up, your monthly payments will probably go up as well, sometimes significantly.

FHA-Insured Mortgage
In this type of loan, the federal government ensures the lender against loss in case the homebuyer defaults on the loan. This program was set up so that Americans who can’t afford the 10 percent to 20 percent down payment required by most lenders can still buy a home. Many HUD Homes can be bought with FHA-insured mortgages, which allow you to purchase the home with a low down payment.

VA Loan
Under this program, the Department of Veterans Affairs guarantees the lender against loss. HUD Homes may be purchased with a VA loan or any other loan.

Assumable or Non-Assumable
You may find a home with a mortgage loan you can “assume” from the previous owner. This means that the lender is willing to transfer the old loan on the home to you. These loans can be wonderful bargains, and the paperwork is usually not very complicated.

Are you ready to start checking out HUD housing options in Denver? The first thing you’ll want to do is find an experienced pro who can help you start the process. Metrowest specializes in these types of sales – give us a shout today and let’s get started!

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