Buying a home is a very complex process. Purchasing a HUD home can be even more confusing so preparing yourself for the process will be beneficial. Here are four common mistakes that often arise when buyers are purchasing a HUD home.
Mistake #1: Buyers don’t do their homework.
Purchasing a home is probably one of the largest investments that a person will make in their lifetime. Generally, it’s important to do research on the neighborhood, schools, commute and of course financing options. When purchasing a HUD home, it is important to research the overall HUD home-buying process. Find out what HUD homes are currently for sale, research the online bidding process and find out the specifics of financing and approval. Often times, the HUD home buying process moves fast so advanced preparation will be very beneficial.
Mistake #2: I found a HUD home that I want to buy but I don’t have financing yet.
If your financing isn’t arranged, you’re really not prepared to buy. More often than not, buyers who are unprepared with their financing often see the potential home get snatched up by somebody else before arrangements can be made.
HUD homes often have more financing options than conventional purchases, but getting these options in place should be a buyer’s first step. A good place to start is by asking your Realtor® or mortgage lender about HUD financing options in the beginning. Several questions that you’ll want to inquire about are the $100 down payment options and ask about the 203(k) program. This program allows HUD home-buyers to work on their property and get the money for the repairs at closing.
Mistake #3: Buyers simply don’t understand the FHA financing guidelines
As you can see, many of these mistakes are very closely tied to one another. If one of them falls apart, the entire deal can quickly go south.
As stated before, FHA lending requirements are very different from conventional purchases. Although 20% down probably isn’t required, other conditions will apply. It’s always a good idea to make sure that your lender has vast experience with FHA & HUD home purchases.
Mistake #4: Buyers aren’t working with realtors who understand the HUD home purchasing process
As you’ve probably found out, there are a lot of Realtors out there, but finding one that has experience with HUD homes can be a bit more difficult. The best plan? Look for recommendations. Talk to your family, friends and co-workers to see if people in your network know of people who have bought or have worked with Realtors with HUD experience. Take the time to interview the agents and explain the process to you in-depth.
Additionally, this blog post on the HUD home-buying process from Equifax® has tons of useful tips and information. Best of luck out there and happy house hunting!