Buyer Information

***EXPIRATION OF OWNER OCCUPANT SALES INCENTIVES for Michigan ***

The following HUD Owner Occupant incentives will expire as of February 12, 2010:

FHA $100 Down Sales Incentive
$2,500 Owner Occupant Sales Incentive (For properties with a purchase price of $25,000 or greater)
$500 Broker Bonus for Owner Occupant Sales (For properties with a purchase price of $25,000 or greater)

The incentives will be eligible for owner occupant sales meeting the above criteria, that have a bid acceptance date on or before February 12, 2010.
Any bids accepted after February 12 will not be eligible for any of these incentives.

Change to Allowable Closing Costs for 203(k) Rehabilitation Loans (Nov. 3rd, 2009):

Please click here, to see Notice H2009-17 which revises certain provisions related to allowable closing costs for 203(k) rehabilitation loans. For 203(k) loans, HUD will reimburse loan origination fees up to: one percent (1%) of the total 203(k) mortgage amount, plus the Supplemental Origination Fee calculated on line B11 of form HUD-92700 (line B11 is the greater of $350 or 1.5% of the total of rehabilitation costs and allowable fees.)

Federal Housing Administration "FHA"

The Federal Housing Administration, generally known as "FHA", is the largest government insurer of mortgages in the world. A part of the United States Department of Housing and Urban Development (HUD), FHA provides mortgage insurance on single-family, multifamily, manufactured homes and hospital loans made by FHA-approved lenders throughout the United States and its territories. While borrowers must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan. FHA has insured over 37 million home mortgages and 47,205 multifamily project mortgages since 1934. Currently, FHA has 5.2 million insured single-family mortgages and 13,000 insured multifamily projects in its portfolio. Clearly, FHA provides a huge economic boost to the country in the form of home and community development, particularly in today's challenging financial climate.

For information regarding the following, click here:

1. Buying a HUD Home

2. FHA Resources, click here

3. FHA Financing Programs

4. Avoid Foreclosure, click here

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What is a HUD Home? A HUD Home is a foreclosed property that has been conveyed to the U.S. Department of Housing and Urban Development (HUD) when the homeowner fails to make payments on their FHA insured mortgage.

Who can buy a HUD Home? Anyone who can qualify for a mortgage or pay cash may buy a HUD Home. There are two types of HUD Home purchasers: Owner Occupants and Investors. An owner occupant buyer is a person who will live in the property as their primary residence for at least one year and may not purchase another HUD Home as an Owner Occupant for two years. Investor buyers are people who purchase the property as an investment or as a second home, or who do not qualify as an Owner Occupant.

How can I buy a HUD Home? If the buyer is financing the purchase of a HUD Home, HUD first requires the buyer to be pre-approved for a mortgage in an amount sufficient to purchase the property. If the buyer is paying cash, the buyer must provide verification of funds. Once the buyer has obtained a pre-approval or verification of funds, the buyer should find a HUD Registered Agent, who can help the buyer find an appropriate property and submit a bid on it. All buyers must submit their bids online through a registered real estate agent.

In typical real estate transactions, the buyer finds the home they like and their real estate agent presents their offer to the seller, who may counter the offer. The buyer and seller may negotiate until mutually agreeable terms are reached or until they reject the terms and move on. When purchasing a HUD Home, there are no negotiations between the buyer and seller. HUD Homes are sold by a sealed bidding process, where all interested buyers submit their best offer online and usually the highest netting bid (after all costs are paid) wins the sale.

HUD Homes are initially offered for owner occupant purchasers. Following the owner occupant priority period, unsold properties are available for all buyers, including investors. Bids can be submitted any day of the week, including weekends and holidays, and are opened for review the next business day.

What is the Owner Occupant Priority Period? When a HUD Home is first listed for sale to the general public, priority for the first 10 calendar days is given to owner occupant purchasers. All bids received during this period are considered as though they are received simultaneously, and are opened the next business day after the bid deadline. Investors cannot submit bids during the owner occupant priority period.

When can investors submit bids? After the 10 day owner occupant priority period, unsold properties are available for all purchasers, including investors, until an acceptable bid is submitted. Bids are opened and reviewed the following business day.

How can I find a HUD Home? HUD Homes are featured on MCB's website (click here to search for available properties). They are also featured in the local MLS.

Can I submit more than one bid for different properties? If an Owner Occupant submits multiple bids for different properties, MCB will select and award the bid that has the highest Net to HUD for that property. Please do not submit bids for properties that may not meet your requirement as MCB will award the bid based on MCB's preference. Investors may bid on and purchase multiple properties.

How can I finance the purchase of a HUD Home? The buyer may pay cash, obtain FHA financing from a HUD approved lender or secure conventional financing. Please contact a mortgage company of your choice for information on common mortgage programs, qualifying guidelines and how to obtain a mortgage appropriate for you.

What is FHA Financing? There are three main types of FHA Financing:

203(b) Regular FHA Loan - If the property does not have any mandatory repairs, FHA will insure the loan.
203(b) Repair Escrow - When the property has less than $5,000 in repairs to bring it up to Minimum Property Standards, FHA will insure the loan provided the repairs are completed by the buyer or the buyer's agent within 90 days from the date of closing. It is a cost to the buyer that the buyer can finance and add the amount to the mortgage. The lender monitors and keeps the funds in an escrow account for disbursement upon completion of repairs to the lender's satisfaction.
203(k) Rehab Loan - The property has more than $5,000 in Minimum Property Standards repairs. The lender must obtain a new appraisal and an inspection report from an approved 203(k) consultant.

Please contact any mortgage company familiar with FHA guidelines for more information on the various FHA financing programs.

Will HUD pay for any closing costs and the selling agent's commission? HUD will pay up to 3% of the purchase price in closing costs that are considered to be reasonable and customary in the jurisdiction where the property is located. Please review the Forfeiture and Extension Policy addendum to the sales contract policy for the list of closing costs that will be paid by HUD.

HUD also allows up to 5% Real Estate Commission. Please remember that higher closing costs and commissions will reduce your Net to HUD and may affect your competitive bidding ratio. For more information, please contact your real estate agent or the listing broker.

When can I get a home inspection done? All HUD Homes are sold "As Is." HUD does not make any repairs to the property. Therefore, it is important that the buyer do a visual inspection prior to submitting a bid. The buyer is also encouraged to have a professional home inspection performed with the utilities activated after the contract has been accepted and signed by HUD. The buyer has a 15 day period after contract acceptance to activate utilities and complete the home inspection. In order to activate the utilities, the buyer must complete the "Request to Turn on Utilities" form on MCB's website and fax it to the appropriate regional MCB office for authorization. Any costs associated with utility activation will be at the buyer's expense.