FHA with Repair Escrow – Buying a HUD Foreclosure
With home affordability reaching levels not seen since World War II, potential buyers are looking to find the best way to take advantage of the foreclosure market.
One of the best values on the market are HUD FORECLOSURES. Why? Because in Georgia they can be had for $100 DOWN for home-buyers purchasing as a primary residence.
HUD Homes are properties that had a FHA loan on them when they were foreclosed. They are unique in the way they are marketed, but they also have some incredible incentives to buy as well. How are they different?
How Are HUD Homes Different?
The major difference with a HUD Home and a traditional foreclosure is that they come with an appraisal and a home inspection in hand. The property condition guessing game does not apply to HUD Foreclosures.
When you search HUDHomeStore.com for HUD properties you’ll notice they have a unique classification on the listing.
- FHA Insurable
- Insurable with Repair Escrow
- Uninsurable
Why is this unique classification important? It’s important because it dictates what type of FHA loan you’ll need
FHA Insurable means that you can get a traditional FHA 203B purchase loan. Essentially the house is move in ready and qualifies for a FHA loan in its current condition. However, you can still do a 203K loan if you like, it just isn’t required.
FHA Insurable with Repair Escrow indicated the home has some minor issues. In order to meet FHA guidelines on property condition a few items must be repaired. Those items must total less than $5000.
Your FHA lender will set aside the money for the repairs in an escrow account and pay for the renovations once they are complete. They are finance into your FHA loan.
The same scenario applies here as it does to the FHA insurable properties, if you’d like to do additional repairs, outside of what HUD has required to to escrow for, you can do so via 203K financing.
FHA Uninsurable designates that this HUD Home is ONLY available to purchase if you use FHA 203K financing (or cash). Basically, the home doesn’t meet FHA property condition guidelines in it’s current state and needs more than $5000 in repair.
Now that you are familiar with how to determine which property needs what type of FHA loan you can focus your property hunt accordingly. In the coming days and weeks we are going to select specific HUD properties and go over in detail how your FHA loan would work on that particular property. Stay tuned for that!
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