HUD has Welcomed Back $100 Down Payment Program for FHA Financing!
Large down payment requirements have made homeownership a challenge for many otherwise qualified home buyers. HUD’s latest announcement includes a $100 down payment on HUD homes with FHA financing where offers are at or above current list price. Any offers exceeding appraised value require buyer to provide additional funds at closing. (Please check with your Mortgage Lender for full details).
$100 Down Program is Availabale in: Arkansas, Colorado, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, Texas and Utah.
Incentives apply to eligible homes located within the HUD Denver Home Ownership Center. The program is effective immediately starting October 20, 2011 and will extend through October of 2012.
How does the $100 Down Program Work? (More Detailed Information)
QUALIFICATIONS (IMPORTANT!):
- Borrower must qualify for an FHA loan (203B, 203B with escrow or 203K) in order to qualify for the program. This is NOT for investors, it's only for owner occupants.
- To qualify for the $100 down, the offer must be for the full list price or higher. If the bid happens to be higher than the HUD appraised value, the buyer must put down the difference in cash, plus the $100.
CLOSING COSTS:
There are some closing costs that are automatically paid by HUD without having to ask for closing cost assistance. These include:
- Condo or HOA transfer fees and any special assesments.
- Tax prorations.
- Cost to provide condo documents to buyer.
- Repair escrow fee of up to $200 if applicable.
- Settlement or Closing Agent Fee.
- Recording fees for the deed.
HUD will also pay up to 3% of closing costs that are "reasonable and customary" IF this is requested in the contract on Line 5 and approved by HUD. If the amount in Line 5 happens to exceed the amount of closing costs, HUD WILL NOT REIMBURSE THE DIFFERENCE. The items that can typcially be included in the 3% and are considered "reasonable and customary" by HUD include:
- Appraisal fee IF an additional appraisal is required to determine the "after rehab" value for a 203K rehab loan.
- Credit report fee.
- Flood Certification fee.
- Home Inspection. Invoice must be provided.
- Homeowner's warranty.
- Loan discount points with a certification from the lender that this cost was actually used to buy down the rate.
- Loan origination fee of up to 1%. Can be 1.5% on 203K loans.
- Pre-paid and escrow items for OWNER OCCUPIED PURCHASES ONLY.
- Recording and/or transfer taxes and fees.
- Survey (if required by the lender.)
- Title Insurance Coverage for owner.
- Title Insurance Coverage for lender.
**NOTE** - Some lenders do not require a survey or title insurance coverage on HUD homes.
Also, keep in mind that the actual money needed at closing will almost always be more than just $100 because even if HUD agrees to pay 3% towards closing costs, that's usually not enough to pay for them all. So the difference, minus the earnest money paid, will be due at closing.
OTHER IMPORTANT THINGS TO REMEMBER:
- Many lenders either will not do loans at all on HUD properties or simply do not understand the various steps of the process enough to ensure a smooth transaction, so make sure your buyers are pre-approved with a lender that knows they are considering purchasing a HUD home.
- HUD assigns closings to one of their designated closing agents. These companies require documents as much as EIGHT TO TEN BUSINESS DAYS prior to closing and will rarely, if ever, make exceptions to this rule. So rush closings are not an option 99% of the time. And if there is a repair escrow or the property is not insurable and must be done as a 203K, expect the process to take even longer. Our experiance with working with LimeTree Lending has been great and can typically get something done within 30 days. You may contact Jocelyn Predovich as a recommend 203k expert to ask any questions about 203k loans.
- Buyers have 45 days to close from the date of contract execution. If a contract extension is needed, a contract extension form must be completed within five business days of the expiration and returned to the HUD closing agent, along with certified funds in the amount of $375. HUD charges $25 per day for extensions on properties over $50,000 and requires the buyer to make a deposit for 15 days. If the closing happens sooner than 15 days, the buyer will be issued a prorated refund for the unused days. My experience has been that HUD will generally waive the extension penalty on the first extension, although they ALWAYS require the $375 extension fee. DO NOT TAKE CHANCES with an extension. If there's even a small chance the contract may have to be extended, be proactive and pay the fee. Chances are it will be refunded anyway, and it's better to be safe than sorry.
