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Dreaming of owning a home but finding the down payment a major hurdle? For many aspiring homeowners, the upfront cost can feel out of reach. That’s where the FHA $100 Down Program can open a significant door to homeownership!

This specialty FHA mortgage was specifically designed to make it easier to purchase certain properties: HUD Homes.

What Exactly is a HUD Home?

HUD Homes are a unique type of foreclosed property that the U.S. Department of Housing and Urban Development (HUD) has acquired through foreclosure proceedings. This happens when a homeowner finances their property with an FHA-insured loan and then defaults on their mortgage payments. The FHA pays the outstanding balance to the original lender and then takes ownership of the property.

Once HUD owns these properties, the agency puts them up for resale to recover the outstanding mortgage balance. These homes are typically sold through a specialized online bidding process on the HUD Home Store website or by working with a real estate agent who specializes in HUD homes.

Who Qualifies to Purchase a HUD Home?

Anyone who qualifies for a mortgage loan or has the funds to buy a HUD home is eligible to make the purchase. While real estate investors can bid on these homes, HUD gives priority to owner-occupant buyers (those who plan to make the home their primary residence) first.

To qualify for the FHA $100 Down Program, owner-occupant buyers typically need to meet these requirements:

• The HUD home must be used as your primary residence.
• You must generally have a minimum credit score of 580.
• You need to have at least a two-year consistent work history.
• You will need to provide documentation of all your income and assets.
• You generally cannot have any bankruptcy filings within the past two years.
• FHA does not require U.S. citizenship. Borrowers with lawful permanent resident status or eligible non-permanent resident status (with valid work authorization) may be eligible, provided they meet all other FHA requirements.
• You cannot have purchased another HUD home within the preceding 24 months.
• If you are a current homeowner, you must also have lived in your current home for at least one year to qualify as an owner-occupant for a new HUD home purchase.

The FHA $100 Down Program: Your Key to Affordable Homeownership

Available exclusively for the purchase of eligible HUD homes, this specialty FHA program allows for an incredibly low down payment of just $100! This is a significant advantage compared to the standard FHA loan’s minimum 3.5% down payment. This option truly opens the door to homeownership for many who might not otherwise be able to afford it.

Key Benefits You’ll Love:

1. Ultra-Low Out-of-Pocket Expenses

With only a $100 down payment requirement, this program is very close to a “no money down” option. Lowering your upfront costs means you don’t have to have a large amount saved just to qualify for the purchase. While you still need to meet FHA income standards to show you can afford the monthly mortgage payments, this program significantly reduces the burden of a large initial down payment.

2. Finance Repairs Right into Your Loan

It’s common for foreclosed properties to need some repairs. Buyers often don’t have extensive funds set aside for fixing up a home, and the sale won’t be approved if the property doesn’t meet FHA’s Minimum Property Requirements (MPR) for health and safety.

The good news? The FHA $100 Down mortgage can be combined with either the FHA 203(k) Rehabilitation Loan or the FHA 203(b) Repair Escrow program. Both allow you to finance the cost of eligible repairs, updates, or renovations right into your mortgage, making that fixer-upper dream a reality!

3. Owner-Occupant Priority & Less Competition

Since owner-occupant buyers get a priority bidding window (typically 30 days) when a HUD home is first listed, you have first dibs before investors can even place bids. This significantly reduces competition and makes the purchasing process less stressful for those planning to live in the home.

4. Potential for HUD-Provided Closing Cost Assistance

In some cases, HUD may provide assistance directly to buyers for closing costs, which can include help with title fees, inspections, some taxes, and other closing costs. This can further minimize your out-of-pocket expenses.

5. Gift Funds Are Permitted

Gift funds from acceptable sources (like family members, employers, or charitable organizations) can be used to cover the down payment, provided they meet FHA’s gift fund guidelines.

How to Find & Buy a HUD Home: The Process

The process for purchasing a HUD home is different from a traditional home sale. Here’s what to expect:

1. Find a HUD-Specialized Real Estate Agent: Since HUD homes are sold through an online bidding process, you’ll need a real estate agent who specializes in HUD properties. You won’t find HUD listings on MLS or Zillow in the same way you would with traditional homes.
2. Search the HUD Home Store: Visit www.hudhomestore.com, the official U.S. Government website, to see current HUD homes for sale in Michigan and across the country.
3. Get Pre-Approved for Financing: Connect with a loan officer (like our team at Priority Home Mortgage!) who is experienced in HUD home financing, including the FHA $100 Down program and options like the 203(k) loan.
4. Submit Your Bid: Your real estate agent will work with you to view the home and submit your bid on the HUD Home Store. You’ll typically need an earnest money deposit to accompany your bid (terms for this should be clarified in the listing).
5. Bidding & Acceptance: HUD accepts bids from owner-occupant buyers throughout a priority 30-day window. After this window, HUD reviews the bids. If the highest offer isn’t deemed sufficient, the bidding process may be extended to real estate investors in a general public auction.
6. Closing: If your bid is accepted, HUD will contact your agent with a settlement date. Buyers are typically given 30-60 days to close the transaction. Inspections and mortgage finalization will be worked out between you, your Mortgage Lender, HUD, and your Realtor during this period.

The History Behind the FHA $100 Down Program

Vacant and abandoned properties can negatively impact communities, often deteriorating and leading to increased crime rates and decreased property values. To address this, the Federal Housing Administration continually seeks ways to make buying these homes easier and less costly, thereby speeding up their rehabilitation and reintegration into safe, affordable, long-term housing. The FHA $100 Down program is a prime example of HUD’s commitment to community revitalization and expanding homeownership opportunities.

Can You Refinance a Home with the FHA $100 Down Program?

No, the FHA $100 Down mortgage is a purchase-only program. You cannot use it to refinance an existing mortgage.

Other Loan Options for HUD Homes

If the FHA $100 Down mortgage doesn’t work for your specific situation, or if you’re exploring other options for eligible properties, here are a few other products to consider:

• FHA 203(b) Home Loan: A popular choice for standard purchases and refinances, known for low down payment requirements and flexible qualification criteria compared to Conventional Loans.
• FHA 203(k) Rehabilitation Loans: Specifically designed for buyers who want to purchase a home in need of repairs or renovations, combining the purchase price and the cost of eligible repairs into one loan.
• USDA Loans: Offered by the U.S. Department of Agriculture for rural homebuyers who meet certain income and property location requirements. Some HUD homes in qualifying rural areas may be eligible.
• VA Loans: Provided by the Department of Veterans Affairs, these offer competitive terms, often with no down payment requirements and flexible credit standards for eligible military service members, veterans, and surviving spouses.
• Conventional Loans: From private lenders, these are another option for financing a HUD home purchase, offering different terms and qualification criteria.

Ready to Explore HUD Homeownership?

The FHA $100 Down program is a unique and powerful tool for the right buyer. If this or any other FHA, VA, or conventional loan program aligns with your homeownership goals, our experienced team at Priority Home Mortgage is here to guide you through every step.

Ready to see if a HUD home with $100 down is right for you? Contact Priority Home Mortgage Today! or Get Pre-Approved!