FHA REO Mortgage Loan Program
Do you know what a FHA-REO Mortgage Loan Program is? Did you know that you can buy homes directly from the U.S. Department of Housing and Urban Development, HUD? It’s not widely known that HUD owns real estate or that its properties are up for sale to potential buyers, also known as FHA REO.1,4
If you think about it, when a borrower defaults on a mortgage backed by the Federal Housing Administration, FHA, which falls under the HUD umbrella, the property can be foreclosed on and sold. Usually, any remaining balance on the mortgage is just written off and the sale offsets the loss.
But in some scenarios, a property may be put up for auction but then never sells and the federal government does not want to hold onto tens, hundreds, maybe even thousands of vacant, possibly distressed, properties.
Instead, they market the properties and allow potential buyers to purchase them absent any liens, at steep discounts to fair market value. Talk about a real estate investors dream.
New Century Mortgage has helped hundreds of investors obtain FHA financing to purchase HUD Real Estate Owned, REO, properties.
Let’s take a closer look at how the purchase process works for HUD REO properties, as well as review how you can utilize FHA financing to help build your own real estate portfolio.
How to Locate and Purchase HUD REO Properties; FHA-REO Mortgage Loan Program
HUD has streamlined their REO inventory available for purchase by integrating a search engine through their website, which allows buyers to search for properties using a variety of parameters.2
For example, buyers can search by a specific state, county, and zip code. Additionally, you can include how many bedrooms and bathrooms you desire or provide a ceiling in terms of what you are looking to spend.2
When you find a property, it should also be associated and list a case number, as well as list the manager for that given piece of real estate.1 Buyers have to work with a broker that is authorized to sell a HUD REO.1
Keep in mind, not everyone can immediately purchase one of these properties. Instead, there is a bidding process, giving priority to owner-occupying buyers.1
There is an initial bidding period. If there are no bids or offers at that time, the bidding is opened up to the general public. This is where non-owner-occupied investors can bid and attempt to purchase the property.1
It’s also important to note, you will not know how many or the amounts of any other offers made for the property. So, make sure to make your best offer! You will also need to put down earnest money.1
Furthermore, understand that these properties are generally sold ‘as-is’, meaning if there are any issues with the property, those become your responsibility.1
Assuming HUD accepts your bid, your broker will be notified and closing will be set between 30-60 days from the date of the accepted bid.1 You can finance the purchase or pay for it in cash.
FHA HUD Real Estate Owned Loan Programs
Purchasing a HUD REO is a great opportunity, especially for borrowers looking to occupy the home. What’s even better is that HUD allows borrowers to finance the purchase of their owned real estate through FHA loan programs.
In fact, in Florida some owner-occupied borrowers can qualify for down payment options below the normal FHA minimum threshold, lowering your overall out of pocket expenses.3 HUD also allows for conventional financing.
Do you think that your new HUD REO may need a little work? Borrowers can also leverage FHA’s 203k Program, which provides financing to purchase a new home while also providing extra funds to renovate and repair any existing issues.3
In conclusion, do you want to learn more about FHA’s HUD Real Estate Owned purchase or loan programs? New Century Mortgage can answer all your FHA REO Mortgage related questions. We have various loan programs from top lenders to choose from.