A HUD home is a government owned property. The government gains possession of these properties, when an owner becomes delinquent on an FHA loan. HUD homes fall into one of three categories: insurable (IN), insurable with escrow (IE), or uninsurable (UI). If a property is insurable, the home is considered to be in relatively good condition. FHA financing is available for this type of home and other loan products, such as VHDA, VA, or Conventional, may also be a viable option for those seeking to acquire a HUD home. For homes labeled as insurable with escrow, HUD has determined that some type of repair work is needed to the property. A repair escrow is only available, if you plan to obtain an FHA loan. Your lender, if they allow repair escrows, will add the escrow amount to your sales price. The repair escrow will be used to pay off receipts provided for the work done to the property.
A home is considered uninsurable, if HUD estimates that a minimum of $5,000 worth of repair work is needed. For this type of property, some type of renovation loan product is needed, unless, of course, you plan to purchase the home with cash. There are a variety of loan products, such as the FHA 203k loan, that can be beneficial in helping you to repair a home. On HUD properties, all repairs must be made after closing. Violating this rule, could result in your contract being terminated. To find out more about the loan products mentioned, contact a lender to find the product that will best suit your needs.