FHA · HUD homesHUD Good Neighbor Next Door and $100 Down: buying a HUD home

A HUD home (HUD REO) is a one-to-four-unit property HUD acquired through foreclosure of an FHA-insured mortgage and sells to recover its claim. With a new FHA loan, a HUD home can be bought under 203(b) if it meets HUD's Minimum Property Requirements as-is, under 203(b) with a repair escrow if up to $10,000 of repairs would make it meet them, or otherwise only under 203(k). The purchase uses HUD's sales contract, form HUD-9548, which sets the price, the discount and eligibility for the incentives. Two incentives, per HUD Handbook 4000.1: $100 Down lets a borrower buy a HUD home with FHA financing and a minimum down payment of $100. Good Neighbor Next Door (GNND) lets an owner-occupant who is a full-time law enforcement officer, teacher, firefighter or emergency medical technician meeting HUD's requirements buy a specifically designated HUD home in a HUD revitalization area at a 50% discount from the price, with a $100 minimum down payment on FHA financing and customary closing costs that can be included in the loan. The GNND buyer must live in the home as their sole residence for 36 months, starting 30 days after closing if it needs no more than $10,000 of repairs, 90 days if $10,000–$20,000, or 180 days if more; certify occupancy every year on form HUD-9549-D; and ask HUD in writing at least 30 days ahead for any interruption (servicemembers on active duty have special rules and may rent while deployed). The discount is secured by a HUD second mortgage: selling or moving out before the 36 months end means owing HUD the amount due on it, while completing the term – with the certifications filed – leads HUD's servicing contractor to release it and record the satisfaction. Payoffs and subordinations of the GNND second mortgage go through HUD's loan servicing contractor.