How is this only $100 down, And what would I have to do to see if I qualify?

Asked by Joe Fantauzzi, 75002 Fri Feb 13, 2009

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T.E. & Naima…, Agent, Dallas, TX
Sat Feb 14, 2009
HUD homes come with their own appraisal that can be used for FHA financing. So, that closing cost can be eliminated. HUD homes are owned by the government. No liens can be present on a HUD home except for local property taxes, which are brought to date at closing by HUD. So, title insurance for the owner would be something you could consider eliminating. The lender will still require the mortgagee title insurance, but that is small.

This leaves you with mostly lender fees. Since the $100 down program applies only to FHA-guaranteed loans, the fees can be minimized to keep your actual out of pocket cost low, and the MIP can be rolled into the loan itself.

Your bid, placed through an authorized Realtor, must be at or above asking price. You can't lowball the price and get the $100 down. Lenders do normally allow the $100 down instead of the typical 3-1/2% cash from you, but you might have to fight for it or look for a different FHA lender.

To get qualified check first with your loan officer to get a pre-qualification letter for bidding on HUD homes, and then ask your Realtor to bid for you.

The $100 down program applies to many properties offered by HUD, but not all buyers qualify. You probably do, but ask the Realtor who would place your bid before proceeding.

Please note that lenders can prohibit you from receiving cash back that is not shown on the settlement statement. Lenders also do not normally allow buyers to walk away with cash from settlement.

So, here is a comparison of typical (not necessarily yours) settlement charges on a HUD vs a $100 down HUD home vs a non-HUD conventional, all priced the same.
Sales Price $85,000
Lender Fees 1,650
Daily Interest 50
MI upfront 1,275
Home insur 1,200
Escrow Tax 600
Escrow Insur 200
Title Fees 650
Survey 400
Home Inspect 300
Prepaids 5,000
Closing Costs 3,000
plus for a conventional non-HUD
1,100 Title insurance plus
350 appraisal
HUD FHA HUD $100FHA non-HUD conv
=========== ============ =============
85,000 85,000 85,000 Price
5,000 5,000 5,000 Prepaids
3,000 3,000 4,450 Closing Costs
93,000 93,000 94,450 Due at Closing
1,000 1,000 1,000 Earnest money
83,300 84,900 80,750 Max Loan with MI rolled in
------------ ------------- ------------
2,550 2,550 3,400* Seller Paids max (*varies by lender)
======= ======== ========
6,150 3,275 9,300 Cash to Bring to Closing Table

For these same scenarios the monthly payments would be
473 489 510 P+I (conv is at 6-1/4, FHAs at 5-1/2)
35 35 64 Mortgage Insurance per month
400 400 400 Tax & Insurance escrow
====== ====== ======
907 924 974 Total Monthly payment

Note: this is not a Good Faith Estimate -- it is just to illustrate the relative effect of a $100 down vs 3-1/2% and 5% down. You can see that the lowest per month is the FHA with more money down, but the lowest cash to close is the $100 down. Conventional is higher cash to close because the down payment is 5% and the rate is likely higher than FHA. Contact your loan officer for an actual GFE.
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Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Fri Feb 13, 2009
Looks like you got some good advice on this one. As RJ said... since HUD will not roll in as many closing costs like you could get from another seller... Sometimes this turns out to be a wash.
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Melissa Hail…, Agent, Plano, TX
Fri Feb 13, 2009
The $100 downpayment only applies when you use FHA financing to purchase a HUD foreclosure home. (Which is why RJ mentioned the differnt types of loans). There are other fees besides the "downpayment" that you will still be responsible for, regardless of the type of loan you get. Additionally, sellers are willing to pay a portion of those fees for you in many cases.

Your best bet is to have a Realtor work for you to help you navigate the home buying process. There is no cost to you to have an agent represent you (because the sellers pay our fees). If you would like to view this home in person, or any other homes currently listed for sale, I would be happy to assist you. Additionally, I will assist you in finding a mortgage broker to get you pre-qualified to purchase a home. Being pre-qualified is important because it helps you to know what your house payments will be each month and gives you the confidence to know you will be approved for a loan. Additionally, a pre-qualification letter from your lender will be required in order to make an offer to purchase a HUD home.

Please visit my team's website for more information on our services to you. We are based in Wylie and specialize in Allen, Plano, Parker, Lucas, and the surrounding areas. Additionally, we work with first time home buyers and HUD foreclosures often. We would be happy to help you with all of your real estate needs.

Melissa Hailey
Coldwell Banker Jane Henry Realtors
North Texas Top Team Realtors
0 votes
Jackie Rankin, Agent, Fort Worth, TX
Fri Feb 13, 2009

This is a HUD home and they have a program that allows you to get in with $100 down. I can provide you with more information if you want to email me. I don't cover that area but would gladly refer you to a Realtor and lender. Just let me know if I can help. Thanks so much!

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