How much Money do I need to Put down for a HUD home?

Many buyers in particularly hot real estate areas are considering HUD housing to expand their inventory options. But what exactly is a HUD home? When someone with a government-insured mortgage can’t meet the payments, the lender forecloses on the home and HUD (Department of Housing and Urban Development) pays the lender what is owed. HUD then takes ownership of the home and sells it at market value as quickly as possible. Today we’ll address one of the most common question regarding HUD homes – how much will you need for a down payment?

How much money is required to buy a HUD home?

This is dependent upon a variety of factors, including the cost of the house and the type of mortgage you get. Typically, you’ll need to come up with enough money to cover three costs:

  • Earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house
  • Down payment – a percentage of the cost of the home that you must pay when you go to settlement
  • Closing costs – the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate agent will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 – $2,000.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time homebuyers turn to the FHA (Federal Housing Administration) for help. FHA loans require very little in terms of a down payment.

Closing costs, which you will pay at closing, are on average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise. If you buy a HUD home, HUD may even pay many of your closing costs.

Are you ready to check out HUD housing options in the Denver area? Metrowest specializes in these types of sales. Give us a shout today – we’d love to help you start the process!

Ken Blevins

About Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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