Tips to Get HUD Homes Closed with FHA Financing
There are so many things that Realtors and their customers need to be aware of when dealing with HUD properties. And if your buyer is purchasing a HUD property and utilizing FHA financing, there’s even more to consider. The following tips will help you get to a successful closing.
Be sure to check out the HUD class we’re offering that discusses all of the changes that went into effect in October. The class is tomorrow (Oct. 11) at 10am inAtlantaor you can take it on Friday (Oct. 12) inWoodstockat 10am. Use the promo code “HUD“ to take the class for free. See details below.
Tips to Get to Closing
1. “IN”, “IE” and “UI” are codes that indicate the property’s eligibility for FHA financing. They have no impact on cash or other financing.
- IN – Insured
- The property meets all FHA minimum property standards and is eligible for an FHA 203b loan. No repairs required.
- IE – Insured with Escrow
- Repairs of $5,000 or less are required in order to meet FHA minimum property standards. The property is eligible for an FHA 203b loan with repair escrow.
- UI – Uninsured
- Repairs of more than $5,000 are required in order to meet FHA minimum property standards. The property is eligible for an FHA 203K loan with repair escrow and will require a new appraisal.
- On IE and UI properties:
- All repairs are done after closing.
- Costs of repairs are added to purchaser’s loan amount and held in escrow by the lender.
2. Rather than the usual 3.5% minimum down payment, the required minimum down payment is only $100 for owner-occupant buyers.
3. When filling out the HUD 9548 contract form, on line 4, check the box immediately to the right of the numeral and check the appropriate form of FHA financing being utilized. Insert $100 in the down payment blank and leave the blanks for mortgage amount and months BLANK.
4. The lender will use the FHA appraisal done on the property when it was acquired by HUD provided it has not expired The contract date must be within 120 days of appraisal date or a new appraisal, at buyer’s expense, will be ordered by the lender.
5. If the purchaser bids more than the appraised value (reflected as “As-Is Value” on HudHomeStore.com), the difference between the appraised value and the bid amount must be paid in cash at closing.
6. If the bid amount is equal to or greater than the appraised value, the upfront MIP of 1% cannot be added to the loan amount and the purchaser must pay it in cash at closing.
7. HUD will provide a termite clearance letter and treatment, if necessary. The Selling Agent must request a copy of the termite clearance letter from the Asset Manager no less than 14 days prior to closing.
8. HUD will provide a Lead Based Paint Inspection on properties built prior to 1978. If stabilization is required, HUD will incur up to $4000 in stabilization cost.
9. In the event the purchaser switches from FHA financing to some other form of financing or cash, the purchaser must reimburse HUD at closing for termite clearance letter, Lead Based Paint inspections and costs incurred for treatment and stabilization, if any.
by Ann Bone