HUD Housing


This quick guide will teach about HUD homes, the benefits and drawbacks of purchasing a HUD Home, and how to purchase one. This includes who HUD homes are a viable option for, how to finance one, and the loan options available for financing. You will also learn where to find listed HUD homes and the importance of working with a HUD-approved buyer’s agent. Finally, this guide contains frequently asked questions regarding HUD homes for your convenience.

What is HUD?

The U.S. Department of Housing and Urban Development (HUD) provides "fair and equal" housing and community development assistance. HUD makes this possible through various programs intended to:

  • Support homeownership
  • Reduce homelessness
  • Increase safe and affordable rental housing
  • Fight housing discrimination

HUD is a cabinet-level government agency, which means that the agency's head, also known as the secretary, is appointed by the President. As of March 10, 2021, Marica Fudge holds the position of secretary. She will remain the secretary until she leaves or a new president takes office.

About HUD Homes

A house becomes acquired by HUD as a result of a foreclosure on a home financed with an FHA-insured mortgage. The government then puts the home up for sale or auction. A foreclosure occurs when the owner can no longer pay their monthly mortgage. Common causes of foreclosure include:

  • Unforeseen medical emergencies
  • Unemployment
  • Debt
  • Divorce
  • Natural disaster
  • Sudden relocation
  • Homeowner death

FHA loans are easier to qualify for than conventional loans as they require a small down payment, some as low as 3.5%, and have more forgiving credit score requirements.

Benefits of Buying a HUD Home

A top benefit of buying a HUD home is its lowered price. HUD doesn't want to have these homes vacant so they are often listed below market value. They also offer special incentives to buyers in specific areas. For example, the HUD Good Neighbor Next Door Program offers HUD homes in revitalizing areas at a 50% discount to community workers, such as teachers, police officers, EMS personnel, and firefighters.

Drawbacks of Buying a HUD Home

HUD recommends that anyone interested in buying one of their properties conduct ample research on the conditions of the home. HUD homes are sold as-is, meaning “what you see is what you get.” It can be beneficial to commission a home inspection to ensure the house is safe and does not have excessive damages or maintenance issues. However, don’t think that HUD homes sit idly vacant. Each HUD home is assigned a field service manager who routinely checks that the home is secure from outsiders and provides maintenance.

It’s important to consider the price of repairs, cosmetic fixes, and updates before purchasing a HUD home. The home’s lowered price may be enticing, but if the buyer needs to spend thousands to make it liveable, it might not be worth the money.

Another drawback to buying a HUD home is if the buyer purchases the home as an owner-occupant, they must live in the house for at least 1 year before selling it. Also, they will not be able to buy another HUD home for 2 years.

How to Buy a HUD Home

Conventional real estate MLS sites do not list HUD homes, but they can be found on, the agency’s official website for HUD listings. However, by using our very own Home Search Portal, buyers can access listed HUD homes and foreclosed homes in their area.

HUD listings contain photos, an asking price, and a deadline by which the buyer must submit an offer. Once the buyer finds a home they are interested in, they must contact a HUD-approved real estate agent to make a bid on the home. HUD homes are sold through an auction and all bids must be in before the deadline. If no bids are accepted, the deadline may be extended and the price lowered. Most HUD homes are sold to the bidder with the highest offer.

If the offer is accepted, the buyer’s agent will be notified and the buyer will be given a settlement date, typically 30-60 days after acceptance. Before settlement, the buyer must secure financing and close on the property.

Financing a HUD Home

Just like financing a regular home, buyers can obtain a loan to finance their HUD home purchase. All loan options are available, including VA, FHA, and conventional loans. For those buying a HUD home needing major repairs, an FHA 203k loan is a great option. This loan option allows the buyer to include renovation costs in the loan. Let’s take a look at the most common home loan options for financing:

Conventional: This type of loan meets a set of requirements defined by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that buy loans from lenders. The credit score minimum is 620.

VA: These loans are available for active military members and veterans. VA loans let buyers finance a home with 0% down with no private mortgage insurance (PMI).

FHA: FHA loans require the lowest score of any loan. They are backed by the Federal Housing Administration and allow down payments as low as 3.5%.

FHA 203k: This loan, sometimes called a Rehab or FHA Construction loan, finances both the home and needed repairs. However, lenders will not approve financing if the home does not meet required safety and livability standards.

USDA: Backed by the U.S. Department of Agriculture, these loans are only for home buyers in eligible rural areas. To receive this loan, your household income cannot exceed 115% of the area's median income. Though this loan does not require a set credit score, a score of around 640 will make obtaining this loan easier.

Common HUD Home FAQs

Do owner-occupants have priority in bidding?
Yes! At the beginning of the bidding process, there is a period of time where only owner-occupants can bid on the home. After this period, bidding is open to anyone interested in the property, whether that be flippers, investors, etc.

Can I make repairs on the home before purchasing?
No repairs can be done on the home by a buyer until after closing. All HUD homes are sold as-is with no warranty.

Do I need to offer a deposit with my bid?
HUD transactions require an earnest money deposit. These deposits show the seller that you’re serious about purchasing the home. HUD Homes priced at $50,000 or less require a $500 deposit. Homes over that margin require a deposit between $500 and $2,000.

Can I back out of my bid if I am no longer interested?
Yes, it is possible to back out of the contract at any point in the process. However, after submitting signed paperwork, HUD may keep all or part of your deposit if you back out. Canceling due to a contingency in the contract will allow you a full refund. Also, you can be fully refunded if your reason to cancel is deemed a “good cause.” This may refer to a death or serious injury in the family, job loss, or the inability to obtain a mortgage despite a pre-approval.

Is a down payment required to purchase a HUD home?
This answer depends on the financing you will use to purchase the home. Just like with regular financing, depending on your loan, you may put down as little as 3% or as much as 20%. Work with your agent and lender to learn more about your options.

Will HUD make repairs?
No, as stated above, HUD will not pay for any repairs to the home. So, it’s best to get an inspection first.

Main Takeaways and Bottom Line

  • Find a HUD-approved agent to help with the buying process
  • Submit your offer with an earnest money deposit
  • Get a home inspection before closing on the property

Though risks are involved when buying a HUD property, luck may be on your side when purchasing one of these homes with their drastically reduced prices. A HUD home is a great choice for first-time home buyers, especially if you obtain financing through an FHA loan.

Need help finding a lender? Contact HomeHunt today to speak with a mortgage professional and become one step closer to buying a new home!