Are you short on cash?   

Would it help if HUD paid most or,

all of your closing costs?     Then read on...

Because HUD can bring your up front costs down!

The costs of buying any home is more than just the purchase price that you agree to pay for the home.  Before you can move in, you'll have to pay various charges, called "closing costs" which we explain in more detail below.  However the good news is, with HUD Homes these costs may be much lower than they are with other homes.

So, not only can you purchase a HUD home at an attractive price, but you may also be able to get it on very economical terms!

What are closing costs?

The common and general term "closing costs" used by real estate professionals and mortgage lenders refers to three specific and different areas of the home buying transaction;
1) the actual downpayment amount.
2) true closing costs (fees associated with a new mortgage).
3) pre-paid items related to home ownership.

Down payment.
Most people know that a down payment is a percentage of the price of the home that must be paid up front, in cash. But, many people don't know that HUD can reduce that down payment from the 10% or 20% most lenders require to an affordable 3%, (or even less!) through a FHA government insured home loan. 

Thus on a $60,000 home, the normal downpayment of $6,000 or $12,000 (Ouch!) becomes a much more agreeable $1,800!.

Closing Costs.
This term covers various fees your lender charges for providing your loan, and other expenses. Specific fees and charges will be itemized on the closing HUD-1 statement.  Lenders are required to disclose all the fees they charge when you apply for a home loan on a Good Faith Estimate.   Typical closing costs will include: appraisal fee, termite inspection, land survey, title insurance, plus the costs with creating the mortgage loan itself like: document preparation / underwriting fee / administration  fee / & tax service fee. Additionally, there are various state taxes, recording and other misc.fees. Whew!   The grand sum of all these 'Closing Costs' typically adds up to about 3% or 4% of the price of your home, depending on where and how you purchase it.

Pre-Paid Items.
These are normal home ownership cost items such as taxes and insurance you are required to pay in advance of the home closing. They typically include your homes annual "hazard insurance" policy and (with less than a 20% downpayment) you will be required to place 3-4 months taxes and 2-3 months worth of home insurance into an escrow account which the lender uses to pay the annual renewals.  Also, when you close in the middle of a month, they will collect "pre-paid interest" on the loan.  This is a one time charge and adjusts your monthly loan payments so they always come due on the 1st of each month. (Tip: closing on the last day of the month will reduce the pre-paid interest to almost zero)

Note:  Special to HUD Home Purchases only.
Many people do not realize this and HUD does not promote this in their literature. But, as HUD sells their homes "as-is" they do not pay the otherwise normal seller paid closing costs of  Owners Title Insurance and Doc Stamps on the deed. These closing costs therefor must be paid by the buyer on a HUD home sale. They can add up to   another 1% to your total cash to close.

Total Cash to Close.  (The Bottom Line!)
The total amount of cash that will be required at the closing will be the sum of; the downpayment, the closing costs and the pre-paids.  Less any items you have already paid, like appraisal fee, loan application fee or your home owners insurance premium.  Also, the "escrow deposit" that was initially required to bid is fully credited 100%.

Realty Commissions - (Paid by HUD)
In most cases, real estate commissions are paid to the broker by the home seller. They usually range from 5% to 7% of the homes selling price. When you buy a HUD Home, HUD will pay the selling agent / broker who assists you the amount specified in your bid-offer. HUD   pays selling agent/ brokers a sales commission of up to 5%.

Not to Worry!
If these terms seem strange... and Math was not your all time favorite subject...not to worry. We know this stuff by heart! And, we can quickly calculate all your costs, down to the total cash required to move in on any home, at any price. We can also estimate your total monthly payments for any bid amount using the normal charges for things like home insurance and the current going interest rates for FHA or VA loans.  We do this day-in and day-out and are very accurate with our estimates.  Plus we have lenders on call who can quickly pre-qualify you over the phone or in person.

In fact, should the home your interested in need some improvements, like new appliances, carpet, windows replaced or new central A/C system - since we have done this so o o o.... many times, we can give you pretty accurate estimates for these type items as well.

HUD will pay ALL your Closing Costs - IF....

The good news is when you buy a HUD Home, all the above costs can and may be picked up by HUD-- if, and only if --they are requested, by specific dollars amount, in the sealed bid offering.

When you buy a HUD Home, HUD will pay many of your usual and customary closing expenses up to a total of 5%.  One must be aware however, that if you are requesting closing costs to be paid by HUD that the amount you ask for is deducted from your bid amount in making the final decision as to which offer ultimately nets HUD the most proceeds.  So, to make a more competitive bid, either pay your own closing costs or raise your bid offer by an equal amount. This will make HUD's net return greater, making your bid more favorable and increase the likelihood that HUD will accept your offer over others.

An important note when asking HUD to pay closing costs.
HUD will not pay more than the actual true costs. Thus if you (or your agent) miscalculate and overestimate the true closing costs -  HUD does not credit you the overage "difference".  They keep it.

Now you might be thinking.. "Well... if I didn't need it, so what! Better save than sorry right?"  Not necessarily so, because... 1) It means you paid more for the home than you had to.  And, 2) Back when HUD was evaluating which offer netted them the most (and because costing costs are deducted) your bid was rendered Less competitive!  

Does this really matter?  Well it all comes down to how desirable the home is and how competitive the bidding becomes.   While we know many tricks and secrets to help give your bids a little "edge" (secrets we will share with those who place their bids through us) too many times,  we've seen buyers loose the home they really wanted to another bidder by less than $100 and even less than $20!   So, yes it CAN matter under very competitive bidding situations.

Our Best Advise.  1 - 2 - 3  for success!
One: Review your cash reserves and then accurately calculate how much closing cost assistance you need. Adjust your bid accordingly. Two: Select an experienced and local professional to help you. Local agents vs. "out of town" agents will be better able to assist you with local market values, inspections and all the other various details to keep your closing deadline on time and hassle free.
Three: Get pre-qualified early. Better yet, if you are ready to purchase a home - apply for your home loan *before* you even find the home you want.  This will prevent credit report surprises down the road (fewer hassles), save you time to close (attractive to sellers) and with written loan approval before making home offers you become essentially a "cash buyer" (more power in negotiating).

Good Luck!!

Questions?  Call Jeff at 640-6699

Is One Of These HUD Homes For You?

As members of the local Multiple Listing Service (MLS) we have unlimited access to All information on All homes and can show you EVERY home that's for sale... beyond just the HUD listings.

Regardless of what company or Agent's name is on the sign...  We can get you inside, get you all the details, help you bid or negotiate on a private sale, assist you in selecting the "right" lender best suited for your specific situation and totally walk you through the entire home buying transaction puzzle process till you receive the keys to your new home!

Like HUD, we're here to assist you with the home ownership dream.  We have the knowledge & experience to make it come true for you! 

Why not Call, and discover how I can help you.