Before the Great Depression of the 1930s, getting a mortgage was a challenging task. Down payments were usually 50 percent of the purchase price, loan terms rarely exceeded 10 years and balloon payments were the order of the day. It was only with the passage of the Federal Home Loan Bank Act of 1932 that the mortgages we take for granted today emerged under President Roosevelt’s New Deal. The Federal Housing Administration was founded two years later.
The FHA’s mission is to insure FHA loan lenders against losses they might suffer in the event of a borrower’s default.
“FHA insurance added security to lenders and expanded the pool of potential homebuyers for whom lenders were willing to borrow” History of the state-sponsored companies of the Federal Housing Agency. In reality, FHA has grown to become the world’s largest mortgage insurance company.
The agency, which became part of the U.S. Department of Housing and Urban Development’s Office of Housing in 1965, insured 274,151, or 15.6 percent, of the 1,753,347 one to four housing loans granted to HUD in the first quarter of that year.
HUD acquires a property after an unsuccessful foreclosure auction in which the highest bid (if any) falls below the amount owed against the property. In other words, ownership of the property goes back to HUD when no one was willing to pay at least what was owed against the property. Once the paperwork is in order, HUD will list the properties for sale on their website. https://www.hudhomestore.com.
Prospective buyers and agents can purchase HUD homes or possessions anywhere in the US simply by clicking the state or area they want. The site regularly displays properties in New Mexico, many of which are available for sale in and around Las Cruces.
HUD is supported by various real estate brokerage companies that represent the agency during the sale. The buy side of the transaction is typically handled by a local broker chosen by the buyer. Most agents are HUD approved, but it doesn’t hurt to ask – just to be sure. The agent submits the buyer’s offer via the HUD online portal.
HUD’s arm that markets the properties does not offer funding for the homes they sell. Hence, prospective buyers are required to pay cash or arrange their own new FHA, VA, or conventional financing, just as they would if they were buying a home from a private party. Initial financing from homebuyers is also accepted. In some cases, the FHA may allow a buyer to take on the previous owner’s loan.
HUD competes for buyers alongside regular homeowners and investors who are also trying to sell their properties. Hence, they usually set very competitive prices for their offerings. Properties are typically sold “as is,” so buyers should conduct thorough inspections before committing to purchase. For properties that require a good renovation, FHA offers a $ 203,000 loan that covers both the purchase price and subsequent repair costs. Successful buyers close on the property like any other home purchase.
HUD isn’t the only government agency selling repossessed or confiscated homes. Agencies like the Department of Veteran’s Affairs, Federal Deposit Insurance Corporation, Internal Revenue, and US Marshall’s Services also list properties for sale on their websites. For a full list of links to government agency listings, see https://www.hud.gov/topics/homes_for_sale.
With a bit of luck and a keen agent in your corner, you could be the next lucky buyer to grab the bargain of a lifetime.
I’ll see you close.
Gary Sandler is a full-time real estate agent and President of Gary Sandler Inc., Real Estate Agent in Las Cruces. He is happy to answer questions and can be reached at 575-642-2292 or [email protected].
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