The Department of Housing and Urban Development (HUD) offers HUD housing options to all Americans that fall into the low-income category who want to buy a home or who cannot afford rent.
To offer affordable homes, HUD features foreclosed properties and puts them up for bid. Applicants interested in purchasing these homes must reach out to the department through a HUD-approved broker.
With this, HUD also offers Section 8 housing benefits to those who need assistance with paying rent. The Section 8 program assists those who have a lower income by helping them pay for their monthly rent.
Those interested in checking their qualification for Section 8 rentals need to reach out to their local housing agency to apply (PHA). The following sections go over how to apply for both the HUD housing and Section 8 options.
Where you can Find HUD Housing
Those who are searching for HUD housing support can view listings in both rural and urban areas. Through the HUD Home Store, anyone can find the latest available listings for a variety of properties across the country and submit their bid.
Potential homeowners can see their options via price, number of bedrooms, state, city, zip code, and more!
Once you have completed a list of HUD houses available, you can begin to narrow down your options. You can request more information from a local realtor and/or mortgage broker about your finance options as well.
You can also reach out to HUD-approved brokers to understand both the housing market and bidding process. They will be able to give you insights on how competitive a market can truly be.
In some areas, you might be the only bidder. However, in other areas it can be extremely competitive. Either way, a HUD housing broker can let you know if you qualify for a special program called the “Good Neighbor Next Door” program that offers a 50% price reduction to first responders and teachers who purchase in specific “revitalization areas”.
To qualify, home purchasers must reside in the home for at least 36 months. It can be a great option for those who are open to where they live.
Bidding on HUD Housing
Once the potential homeowners finds a HUD home in the Home Store, they must reach out to a department licensed broker. The broker will then bid for the property.
These potential homeowners can only get HUD housing if they can qualify for financing and can afford the property. HUD does not provide loans.
However, there are many financing programs available including a Federal Housing Administration (FHA) backed loan. This needs only a 3.5% down payment and a credit score of 580 and above.
If a potential homeowner can not attain financing after successfully winning a bid, HUD will transition to the next highest bidder.
As an important note, owner-occupant buyers have first option on accessing HUD home. This is because the department would prefer first priority to lower-income individuals to have an opportunity to access affordable housing. However, unsold properties are available for any interested investors or buyers.
How to Finance a HUD House Purchase
Potential homeowners interested in purchasing HUD housing generally look at FHA loans to complete the purchase. Please note though, these loans have their own list of requirements.
Banks will consider the following for potential homeowners who apply:
- Their credit score.
- Their debt-to-income ratio.
- Their financial history.
- Their employment history.
- Their plans for the property.
Individuals can receive HUD housing by applying through a private lender however the lender must approve the financing.
HUD homes can also be purchased with cash if possible since the properties are greatly reduced in price.
It is important to have a complete inspection before a HUD home purchase. HUD homes do not come with a warranty.
Here’s a few important things you will want to have professionally inspected before any purchase:
- The foundation
- The roof, walls and floors
- The heating and cooling system
- The plumbing system
- The electrical system
- The basement
How to Apply for Section 8 Rentals
HUD does not only sell properties, but it also offers Section 8 housing for those who need assistance with their rent. Section 8, also known as the Housing Choice Voucher Program, requires that individuals put 30% of their income towards the monthly rental cost of the property.
HUD will then make up the difference between what the individual can afford and the actual rental cost.
In order to take advantage of this program, individuals must submit a Section 8 housing application to the local PHA for approval before hand. Applicants are also be responsible for finding the apartments that will take the voucher and take part in the program.
When an individual finds a rental property that will take part in the program, they can continue in the program for as long as they need financial support.
PHA’s in the area review Section 8 applicants to review who is actually in need based on the individuals total income, housing history, family makeup and eligible citizenship status.
Those who qualify are then added to a waiting list for vouchers. When the next voucher becomes available, the PHA will reach out to the next person on the waiting list.
Section 8 Housing Lists
Those who receive a voucher can review local Section 8 housing listings to find rentals. Not all local rentals will accept a Section 8 housing voucher.
A PHA may have insight on where to best start the search. However there could be a fair bit of competition depending on the area an individual is looking.
Regardless, this is a great program designed for anyone who needs rental assistance.