Contrary to what you may have heard, financing a HUD home is NOT complicated.
Taking a little bit of time to familiarize yourself and your lending institution with some key information will assist you in adding HUD to the types of transactions you are prepared to successfully finance for buyers.
While it is possible to finance the purchase of a HUD home with a conventional loan product you may want to opt for a more flexible Rehab or FHA 203(k) loan.
The reason why is that many HUD homes, similar to other Bank Owned/REO properties, are listed without active utilities. In some cases the lack of gas, water and/or electricity is due to damage or vandalism so a conventional or regular FHA 203(b) loan is more than likely out of the question.
It’s important that you closely communicate with appraisers during a HUD transaction.
- Buyers have to request and get written authorization to have the utilities turned on for home inspection/appraisal.
- The authorization process can take a couple of days to get approved and should be started as soon as the buyer has an executed contract.
- Once HUD authorizes the utility activation the Buyer needs to have the utilities turned on in their name for the allowed period of time.
Make sure home inspectors and appraisers know in advance about utility activation to avoid wasted time, unnecessary trips to the property and worst of all delays to the closing date.
REMEMBER THAT EXTENSIONS COST THE BUYER MONEY
ALL HUD HOMES ARE SOLD AS-IS. HUD MAKES NO REPAIRS AND DOES NOT ALLOW REPAIRS PRIOR TO CLOSING.