Since 80/20 mortgages went the way of the dinosaur, there have been only a few options for those who don’t have the cash for a traditional 3.5-5% down payment. One of those is to purchase a HUD home via FHA. The only down side is that the inventory of houses available is fairly small. This isn’t something that can be done with just any house, the home must be a HUD-owned foreclosure.
Unfortunately, the powers that be don’t do a very good job of promoting this program. That’s one reason why you want an agent – like me! – who is experienced in dealing with the paperwork and (unfortunately, rather frequent) policy changes of these programs.
Besides the down payment, there are also closing costs and pre-paid items that go into your escrow account (like some money toward the taxes and insurance) that you’ll have to pay at closing. So it will take more than $100 from start to close. The good news is that HUD will pay your closing costs up to 3% of the purchase price – which means that if you’re paying $100,000 for the house, they’ll ante up $3,000 for you.
HUD also requires that you give them an earnest money deposit of $500 for houses with a purchase price of $50,000 or less. You’ll need to plunk down $1,000 for a home that’s more than that. For most houses that are at least $100,000, your earnest money combined with the 3% will probably cover everything (talk to your lender for specifics).
If you’re one of the many who can afford to own your own home but can’t afford the down payment to buy your own home, HUD’s $100 down program might be a great way for you to experience the joys and tribulations of owning your very own piece of America.