Fha Foreclosures

Written by Stephanie Dula
Bookmark and Share

Homes become FHA foreclosures when the owner defaults on an FHA (Federal Housing Administration) insured loan. Since FHA is the financing branch of (HUD) U.S. Department of Housing and Urban Development, these properties are repossessed by HUD and are also referred to as HUD homes. HUD homes carry no warranty and are sold "as is," often sustaining significant damage from previous owners.

HUD Home Buyers

HUD will generally divide buyers of FHA foreclosures into two separate classifications: owner-occupants and investors. Owner-occupants are those who plan on living in the property for at least one year as a primary residence. Depending on each state's particular regulations, HUD may give priority to owner-occupants.

Because HUD homes are often located in transitional neighborhoods, the agency encourages buyers to strengthen the community by staying around a while. Many of these buyers are of low- to mid-income level, and FHA foreclosures provide them with a chance own a home on terms they can afford. FHA financing also offers "rehab" loans to help with what can be costly repairs, helping buyers improve their property.

First time home buyers often look to HUD homes as a way to purchase a larger home than they would normally be able to afford. Since FHA is devoted to providing home ownership opportunities to as many people as possible, there are several creative loan packages which can help cover closing costs and even agent commission. The first step in applying for an FHA loan will be pre-approval, as is the case with traditional mortgages.

Bookmark and Share