Has anyone bought a HUD home before?

[tazcat70]

I have wanted to move to the country for a VERY long time. I have always felt that my husband just isn't interested in that.

We own 2 homes, side by side in a city. One is my parents old home and the other I bought. Neither is in great shape. The one that I bought was basically a unsound shell when I bought it. We have done a lot of work on it, and have matched the purchase price in repairs, and it still is now a sound shell of a house. It will need new wiring (the person who I bout it from used remnant wire,) walls, cabinets, and fixtures. Basically it is a shell.

On Sunday I was delivering eggs to our neighbor and he wants to buy it, as is, for slightly less than we have in it. He has a brother and a sister that are getting ready to come here from Vietnam.

At first it was an adamant no, but I said I would discuss it with my husband and see. We haven't done any work on it for over a year, except in the past couple of weeks we have been cleaning it out. We decided that we would think about it and see what was meant to be....

Long story shorter...

I was looking at property online and I found a HUD home with 5 acres. We went a looked at it, and decided that we would try to get it.

So I called the listing agent and they said we need a pre-approval letter before they could even bid on it. So my husband went to the bank. Here is where I get lost. Since it is a HUD home they are talking about a temporary 6 mo loan based on our equity in my parents old home(20% of the cost of the HUD home), and then a 2nd loan for the HUD home that is 80% of the cost of the home. They were not even taking into consideration the 2nd home we own, because it is not in a livable state. They submitted the loan application this morning and we should know something in the next couple of days. I may be just getting excited about nothing because it may come back denied.

I REALLY do not want to get into a situation where we will ultimately end up on the street with the bank owning everything. So I need help understanding this.

Thanks for all your help!

 

[Katy]

I am no help on figuring out the financing, but I'll keep my fingers and toes crossed on you getting the place.....I know how bad you want a place like that.

 

[tazcat70]

Thanks Katy, it is funny that we were just talking about this less than 2 weeks ago. Changes in my life seem to happen very quickly.

 

[JetBlack]

I bought a HUD repossession. You are talking about an 80-20 loan. You basically have 2 loans. One for 20% and one for 80%. Just make sure you can swing the total payment. Once you pay off the "little loan" your total outflow will drop and then the mortgage is nicer to pay.

I did an 80-15-5. 80% "Primary loan" a 15% second mortgage (about 100 a month, on a 15 year term) and 5% cash down. Your 20% loan will look like a 20% down payment to your mortgage bank and carries no insurance. Like an unsecured loan, where you just walk into the bank and say "I'd like a loan for $10,000, just cuz." There's nothing for the bank to foreclose on, if you don't make payments on that loan, so the rate is higher.

The rate will be around 6-9% and a shorter term than a regular mortgage.

The 80% loan will carry insurance, and the escrow payments for your local taxes and whatnot.

It's a very normal way to buy homes and can free you from First Time Homebuyers Insurance, because it looks like (on paper) you are only borrowing 80% of the home's value. If the bank needs to come take your keys, due to non-payment, they can sell the house, for full price and make 20%. If you don't make your payments on the small loan, well, that's what the higher interest rate is for.

My HUD repo was purchased at auction. It was only open for two days! I was second highest bidder, but my ducks were in a row, so when the high bidder had some problem with financing, I got the house for $76,000! I paid off my little loan in five years. Now my payments are $480 a month, but this year I paid the taxes myself so it's only $380. Been here almost 7 years and I'm still happy!!!!!!

 

[tazcat70]

Thank you Jetblack. It didn't work out for this property, but at least now we know. It is scary how fast everything moves with a HUD home purchase. But knowing how it all works makes it much easier to deal with it.

 

[sfw2]

Tazcat - PM me. I work in the mortgage industry. From your original post, the downpayment on the HUD home was coming from an equity loan on your parents' old house. Bear in mind, if you find yourself unable to make the mortgage payments, for whatever reason, you could, potentially lose BOTH homes to foreclosure.

 

[JetBlack]

You are welcome. Keep looking for homes. When you find the right one, you'll know. Now you know to be prepared to move fast. Scary fast

I was 100% satisfied with my purchase. I don't know how HUD does it but they paid for the upkeep on the house, while it sat vacant, for 3 years. They paid for my realtor's commission and their own and all closing costs!

All in all, a good experience.

 

[mjdtexan]

Quote:
That made my head hurt. I am no good at that stuff.


I would try and coax some more money out of the interested party on the second home. Hold out for $5000 more at least. I hope you get your new home on 5 acres!!!! You will need a small tractor. This is what I use on my five acres. Good luck and let us know!!!!

 

[mjdtexan]

I just saw where it didnt work out for you. Keep looking!!!!!!! You will love more land.


pssst, it is more work though. You seem like yall are up for it