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ing and Urban Development 

ousing

www.hud.gov espanol.hud.gov

Presorted STD

Postage & Fees Paid

HUD

Permit No. G-51
HUD

owning their own home never seems to become theirs. 

That’s where theUnited States Department of

Housing and Urban Development (HUD) comes

into the picture. HUD is a government agency

created to help make the American dream of homeownership a real possibility for everyone.

Since 1934, HUD’s Federal Housing

Administration (FHA) has helped millions of

Americans unlock the door to homeownership

and have a home of their own. We do it by

making homebuying easier and more

affordable. One way we can do this is by selling

homes HUD owns in many communities throughout the

U.S., at attractive prices and economical terms.

So that home you’ve been dreaming about just may be one you buy from HUD.

But whether you decide on a HUD Home or not, you can use this guide to take you

step by step through each stage of finding and buying your own home.

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OWNING

A HOME OF

YOUR OWN.
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COST 6% 6.5% 7% 7.5% 8% 8.5% 9% 9.5% 10%

$25,000 $ 150 158 166 175 183 192 201 210 219

$30,000 $ 180 190 200 210 220 231 241 252 263

$40,000 $ 240 253 266 280 293 308 322 336 351

$50,000 $ 300 316 333 350 367 384 402 420 439

$60,000 $ 360 379 399 420 440 461 483 505 527

$70,000 $ 420 442 466 489 514 538 563 589 614

$80,000 $ 480 506 532 559 587 615 644 673 702

$90,000 $ 540 569 599 629 660 692 724 757 790

$100,000 $ 600 632 665 699 734 769 805 841 878

$110,000 $ 660 695 732 769 807 846 885 925 965

$120,000 $ 719 758 798 839 880 923 966 1,009 1,053

$130,000 $ 780 822 865 909 954 1,000 1,046 1,093 1,141

$140,000 $ 839 885 931 979 1,027 1,076 1,126 1,177 1,229

$150,000 $ 899 948 998 1,049 1,101 1,153 1,207 1,261 1,316

$160,000 $ 959 1,011 1,064 1,119 1,174 1,230 1,287 1,345 1,404

$170,000 $1,019 1,075 1,131 1,189 1,247 1,307 1,368 1,429 1,492

MORTGAGE PAYMENT CALCULATOR.

Monthly principal, interest payments for 30-year, fixed rate mortgage.

Monthly taxes, insurance not included.

40,000 3,333 967

45,000 3,750 1,088

50,000 4,167 1,208

ggpp

can afford to budget 29 percent of their gross monthly income to housing expenses,

depending on total debt. Buyers with no debt can budget as much as 41 percent of

monthly income to housing.

No need to reach for your calculator–we’ve done the math for you.The two

charts on the opposite page should tell you everything you need to know.

The first chart tells you how much 29 percent of your monthly income is. Find your

annual income, or a figure close to it, in the column at the left. Then read across to find out

how much your monthly gross income is, and finally, what 29 percent of that figure amounts

to. This is approximately how much you can spend on total housing costs each month. 

The second chart tells you how much your monthly mortgage

might be based on a home’s selling price. Remember to keep in

mind that the monthly figure from this second chart is

based on a 30-year fixed mortgage and includes

monthly principal and interest payments only. Taxes

and insurance – which vary from community to

community – are not included.

So if 29 percent of your gross income is, say,

$604, that doesn’t mean you can pay a $604-

per-month mortgage. You need to look at a

mortgage somewhat below that, to leave room for taxes and

insurance. Be sure to ask your lender to help you estimate

how much your total costs will be.
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And all the financial details that can seem so mind-boggling to first-time home buyers are

something the agent deals with every day. He or she will help you figure the price range you can

afford, explain the different types of mortgages, guide you through the paperwork, and be there to

answer last-minute questions when you sign the final papers at closing.

If you’re buying a HUD Home, you’re required to use a real estate

agent. While purchasing a HUD Home may be easier than

many private real estate transactions, there are still some

requirements which must be met–certain forms that

must be used, and procedures that must be followed.

But these requirements are clearly stated in advance, and

the real estate agent will be there to help you through it all. 

There are no negotiations between buyer and

seller when you buy a HUD Home. This can be a real

advantage. There’s no haggling about price–everything is

spelled out in black and white. What’s more, your offer is

responded to promptly, and if it’s accepted, closing on the home

usually will occur within 30-60 days.

Finding a HUD-approved selling broker is not difficult, 

especially since so many real estate brokers are happy to sell HUD Homes. All you need to do is to

call a few brokers who work in the area you’re interested in and you’ll find someone willing and

experienced. Some brokers specifically advertise their desire to sell HUD Homes in the real estate

sections of newspapers.

Best of all, the valuable help you’ll receive from the real estate agent is usually free! In most

instances, agents get their sales commission from the home seller, not you, the buyer. Even if you’re

buying a HUD Home, HUD will pay the broker’s commission.

IT’S TIME TO

STOP TALKING

ABOUT IT

AND BEGIN

DOING SOMETHING

ABOUT IT.
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This can save you and the agent a lot of time. It’s a good idea to actually write down your wishes,

and share the list with your agent. This is helpful because he or she will usually have lists of the

properties for sale in your area, including all the HUD Homes. HUD Homes are listed in the local

multiple listing service (MLS) and on the internet at www.hud.gov. A broker should have all the

information you need.

Almost any home you look at will have room for improvement. But the more that needs to be

done to a home, the less you’re going to have to pay for it. HUD Homes, because they’re sold in

“as-is” condition, can often be a great, affordable opportunity for the fixer-upper. Many are in fine

neighborhoods and offer outstanding values. And while some HUD Homes do qualify as “handyman

specials,” many are in very good condition. 

HUD does not warrant the condition of its properties, but will give you the information it has about

the condition of the property you’re interested in. You can use this information in formulating your bid.

There’s even a HUD loan program available called the 203(K), where buyers can borrow

money to make repairs on some properties. You repay these funds

later, as part of your mortgage. Just be aware that 203(K)

funds aren’t available for all houses in all areas. Ask the real

estate agent you’re working with about 203(K) availability

in your area.

BEGINNING TO MAKE IT

YOUR OWN.

Once you’ve found the home of your dreams,

it’s time to make an offer to buy it. Before deciding

how much to offer, HUD urges you to get a professional

home inspection. It can also be helpful to find out how long

the home has been on the market—if it’s been for sale awhile, the

seller may be more willing to bargain.

Offers for HUD Homes can only be made through a licensed real estate broker. This way, HUD

requirements are met and buyers get the help they need. HUD will pay real estate

commissions if the commission amount is requested as part of the bid.

The initial listing price of each property is HUD’s estimate of current

fair market value and is based upon an appraisal conducted by an 

independent real estate appraiser. HUD may accept an offer that is less

than the listing price, depending on market conditions and the length of

time the property has been on the market. In some instances, buyers will

offer more than the listing price if they believe the market conditions

demand it or if the home is particularly appealing. It is important for

buyers to be aware of the property values established by HUD and

submit offers knowingly.

You will generally make your offer for a HUD Home

during a designated “Listing Period.” With the commencement of

the Initial Listing Period, bids may be submitted by all potential purchasers.

However, priority will be given to owner-occupant purchasers for the first

10 calendar days as follows: All owner-occupant offers received during the first five days of

this10 day period will be considered to have been received simultaneously. On the first business

day following the expiration of the five day period, owner-occupant bids are reviewed, at which

point the highest acceptable net owner-occupant will be accepted. Should there be no acceptable

owner-occupant bids, owner-occupant bids will be reviewed on a daily basis for the remaining five

days. At each such daily review, HUD will accept the highest acceptable net owner-occupant bid.

At the conclusion of the 10-day owner-occupant priority period, should the property remain unsold,

a review of all general public bids (e.g. investor) received during the 10 day period will be conducted.

Earnest money. When you make an offer on a home, the seller will usually require an “earnest

money” deposit as proof that your offer is serious. If the offer is accepted, your earnest money deposit

will become part of your down payment or closing costs. If your offer is rejected, the broker will

return your earnest money to you.
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YOU’RE

ALMOST

HOME.

many HUD Homes are eligible for FHAinsured

mortgage loans, this can make financing easier to obtain.

However, you are not required to get an FHA loan to buy a

HUD Home.

Fixed-Rate Mortgage. With a fixed-rate mortgage, your

interest rate stays the same for the term of the mortgage,

which is usually 30 years. Your principal and interest payment

remains stable, making it easier to plan a monthly budget.

However, initial interest rates tend to be higher than with other

types of loans.

Adjustable-Rate Mortgage. With an ARM, your interest rate

and monthly payments start out lower than with a fixed-rate, but your

rate and payments can change either up or down, depending on where

interest rates in general are going. (If they’re going up, your monthly payments will probably go up

as well, sometimes significantly.)

FHA-Insured Mortgage. In this type of loan, the Federal Government insures the lender

against loss in case the home buyer defaults on the loan. This program was set up so that Americans who can’t afford the 10 percent to 20 percent down payment required by most lenders can still

buy a home. Many HUD Homes can be bought with FHA-insured mortgages, which allow you to

purchase the home with a low down payment. You do not have to be a first-time buyer in order to

qualify for an FHA loan.

VA Loan. Under this program, the Department of Veterans Affairs guarantees the lender against

loss. HUD Homes may be purchased with a VA loan or any other loan.

Assumable or Non-Assumable. You may find a home with a mortgage loan you can “assume”

from the previous owner. This means that the lender is willing to transfer the old loan on the home

to you. These loans can be wonderful bargains, and the paperwork is usually not very complicated.

Before you decide which loan is right for you, talk to your loan officer. You’ll get information that

will help you figure out which option best suits your needs.
g 

“as-is” condition. That means you agree, if you buy the home, to accept it in

its present condition. HUD does not pay for the correction of

defects in existing homes that it sells or on homes purchased

with FHA-insured mortgages. The owner of the home will

be responsible for needed repairs. Therefore, be sure of the

condition of the home before you submit your offer.

THE FINISH LINE.

The day you finally close on your new home will probably be one

of the most exciting in your life. Finally, the long, tedious process of finding a

home and getting a loan is over, and by the time the day is done, you’ll be the proud

and happy owner of your new home.

Before that day ends, you will be asked to sign a seemingly endless number of forms, but the

closing agent will go over each one with you. It’s all necessary, but you can make it a little easier by

asking the real estate agent about it before the big day comes. Also, when you apply for your 

loan, your lender is required to give you a booklet explaining closing costs, 

an estimate of how much cash you’ll have to supply at the closing, and a 

list of all the documents you’ll need.

If you have any questions, perhaps they are answered

in the “Q and A” section that follows. If not, why not go

straight to the phone right now, and call a real estate 

agent and ask about HUD Homes? It’s a small, first step.

But the journey could eventually end at the door to a

home you call your own.

Good luck and have fun!

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Most people know that a down payment is a percentage of the price of the home that must be

paid up front, in cash. The typical downpayment is three percent and family members may

give a gift to make up the balance of the downpayment.

This term covers various fees your lender charges for providing your loan, and other expenses.

Closing costs typically add up to about 3 percent or 4 percent of the price of your home,

depending on where you purchase it. But when you buy a HUD Home, these costs may be

picked up by HUD – if this incentive is offered by HUD and if they are specifically requested,

by dollar amount, in the bid offering. If you buy a HUD Home, HUD may pay many of

your usual and customary closing expenses plus real estate sales commissions. Just remember

that closing costs and sales commissions are deducted from the bid amount in making the

decision as to which offer brings the greatest return to HUD. Since bidding is competitive,

you may, in order to offer a more competitive bid, pay your own closing costs. This makes

HUD’s net return greater, making your bid more favorable and increasing the likelihood that

HUD will accept your offer.

These are paid to the broker by the seller, and usually amount to 6% or 7% of the cost of the

house.When you buy a HUD Home, the selling agent’s commissions are usually paid by HUD.

CLOSING COSTS.

COMMISSIONS.
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y 

Anyone who has the money or can qualify for the necessary amount of mortgage financing can purchase a HUD Home.

You do not have to be low-income or meet any other such limitations.

Can I get a HUD Home for free, or for one dollar?

No. HUD acquires its properties through the foreclosure of FHA insured mortgages. One of HUD’s many missions is

to maximize return to the FHA insurance fund, which it does by selling the properties at fair market value.

How do I buy a HUD Home?

Our policy is to market acquired properties on a competitive basis with

offers being submitted through any participating licensed real estate broker.

Local brokers will assist you in the transaction. They can show the property

to prospective buyers, as well as answer questions and provide information

on the location of parks, schools, shopping, and employment centers.

Are HUD Homes meant for low income people?

HUD Homes come in a variety of price ranges, though most are affordably

priced, making them accessible to low and moderate income Americans.

What are the income requirements?

If you make a cash purchase, there are no income requirements. Otherwise,

you must be able to qualify for a particular type of mortgage financing

based on established mortgage lending criteria (see page 3).

How does HUD decide how much to charge for a HUD Home?

The listing price of a HUD property is a price based on the appraised value.

Can investors purchase HUD Homes?

Yes. However, HUD offers its properties to owner/occupants for a period

before making them available to investors.

What happens if I can't close the sale within the time permitted by HUD?

You’ll probably have to pay fees for an extension of time, usually in increments of 15 days.

Is there any way for me to get advanced notice about homes that will be coming up for sale?

No. HUD Homes are listed for sale in the local multiple listing service (MLS), the Internet at www.hud.gov or ask

your broker.

when you want to sell.

Closing Costs. Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage

insurance premium, homeowners insurance, prepayments for property taxes, etc. Closing costs average 3 percent -4 percent of

the loan amount. If you’re buying a HUD Home, you can request they be paid by HUD, if the sales incentive is offered.

Contingency.A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or

her sale of a present home.

Conventional Mortgage. A type of mortgage not insured by either the Federal Housing Administration (FHA) or the

Department of Veterans Affairs (VA), and thus usually requiring a 10 percent - 20 percent down payment. (HUD Homes may

be purchased with a conventional mortgage.)

Earnest Money. Funds submitted with an offer to show “good faith” to follow through with the purchase. Earnest money is

placed by the broker in an escrow/trust account until closing, when it becomes part of the down payment or closing costs.

(HUD generally requires an earnest money deposit of $500-$2,000.)

Escrow. A procedure in which documents or transfers of cash and property are put in the care of a third party, other than the

buyer or seller.

FHA Financing. Financing for a loan which will be insured against loss by the Federal Housing Administration—a part of the

U.S. Department of Housing and Urban Development (HUD). Such financing allows for a lower down payment than required

by most lenders.

Homeowners Insurance.Insurance that protects the homeowner from “casualty” (losses or damage to the home or personal

property) and from “liability” (damages to other people or property). Required by the lender and usually included in the monthly

mortgage payment.

Loan Origination Fee. A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.

Mortgage Insurance Premium (MIP). A charge paid by the borrower (usually as part of the closing costs) to obtain financing,

especially when making a down payment of less than 20 percent of the purchase price, for example on an FHA-insured loan.

Point. An amount equal to one percent of the principal amount being borrowed. The lender may charge the borrower several

“points” in order to provide the loan.

Property Taxes. Taxes (based on the assessed value of the home) paid by the homeowner for community services such as

schools, public works, and other costs of local government. Paid as a part of the monthly mortgage payment.

Title Insurance. Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.

VA Loan. A loan guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private 

lender. (HUD Homes may be purchased with a VA loan.)

A WORD ABOUT

LEAD-BASED PAINT.

HUD and the Environmental Protection

Agency (EPA) have begun a nationwide 

effort to alert home buyers to the risk that

older homes may contain lead-based 

paint. Lead exposure can be harmful 

to young children. If you are making 

an offer on a home constructed prior 

to 1978, you should receive a copy of 

the EPA pamphlet “Protect Your Family

from Lead in Your Home” from your 

broker. You will be required to submit a

lead-based paint addendum with your

offer on the HUD Home. You will be given

the opportunity to conduct a risk 

assessment or lead-based paint 

inspection (at your own expense) prior to

being obligated under the contract.