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14 Tips To Buy Government Foreclosures Government-owned properties include homes that previously had loans backed by the federal government through programs sponsored by agencies such as Veterans Affairs (VA), US Department of Housing and Urban Development (HUD), and others.
|Buying HUD or VA Foreclosures:|
Once the loans backed by these agencies are in default, the lender takes over the property, after which the government entity that insured the loan pays off the lender and takes possession of the property.
To purchase a government-owned home, you'll have to do some research into the process, which varies by agency. Here are 14 general tips to get you started.
If you buy a VA or HUD home, you must:
Tips to buy a HUD foreclosed home:
- Buy the VA and HUD home "as is."
- Use the services of a VA qualified or HUD registered real estate broker.
- Prove you have adequate cash reserves to purchase the home and be pre-approved for a mortgage.
- Provide your real estate broker with the required earnest money in the form of a cashiers check or money order, before making a bid on a VA or HUD home.
Tips to buy a VA foreclosed home:
- HUD buyers do not have to finance a HUD home with a FHA loan.
- HUD gives first priority to owner-occupied purchasers (not investors) to buy HUD homes.
- HUD offers three property types: FHA insurable homes; FHA insurable homes with a repair escrow; and, homes that are not insurable with an FHA loan.
- HUD may escrow part of the sales price to bring a property up to its standards to qualify for a Federal Housing Administration (FHA) loan.
- HUD buyer must make earnest money check payable to the escrow account of your HUD registered real estate broker.
- HUD requires earnest money of $500 if the purchase price is $50,000 or less; $1,000 earnest money is required if the purchase price is greater than $50,000.
- VA property code determines how a buyer may finance the property.
- VA offers "VA Vendee Financing" which is a form of seller financing.
- VA buyers do not have to be veterans to qualify for VA Vendee financing.
- VA requires the minimum earnest money deposit is $1,000 and the deposit is non-refundable except if the buyer is unable to obtain financing.
See the article Finding Foreclosures to learn more about which federal agencies sell foreclosed homes and to find links to those agencies' websites.