Dallas-Fort Worth Real Estate Investor Club

BY: CARRIE BAY, edited by Greg Wilson 

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers.

In select states, including Texas, from now until October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home.

The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA). Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price.

Additionally, HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan.

With an FHA 203k loan, “buyers can find a property that needs some TLC, fix it up however they want to, and finance the whole thing for $100,” Martin explained.

In addition to $100 down instead of FHA’s typical 3.5 percent down payment, HUD says it will also cover up to 3 percent of the closing costs in most cases.

Dan Brunner wrote:

I hope this is not another government intervention that just extends the problem. If the buyer's cannot bring the 3.5% down and 3% closing costs to the table, then they probably don't have enough reserve to continue to make their mortgage payments if they get in a bind. With very little skin in the game, it seems to be too easy for them to default and just walk away.

Wouldn't it be better for the Fed to offer financing with 3.5% down for investors who could rent them out, seller finance them, or flip them to buyers who can qualify?