A HUD home is a foreclosed home which is now owned by the Department of Housing and Urban Development (HUD) of the Federal government.  How did it become a HUD home?  The home buyer used an FHA mortgage to purchase the home.  If you read our blog on FHA mortgages, you remember that these are mortgages which are “insured” or “guaranteed” by HUD.  In other words, the bank lends you the money but HUD assures the bank that in case of foreclosure, HUD will pay the bank any losses that occur.  The bank is insured against default by HUD.

In Minnesota, the process to purchase a HUD home is a little different than purchasing any other foreclosed home.  The process is an auction process.  The rules may vary depending on how long the home has been on the market but briefly, you will be submitting a sealed bid to HUD.  Other buyers may submit sealed bids as well.  If your bid meets the minimum bid requirement established by HUD for this property, AND it also yields the biggest profit of all the bids to HUD, you will “win” the home.  Be sure to work with a Realtor when purchasing a HUD home because the rules are quite different than those used in purchasing other homes.  Both your right to a home inspection and your right to a refund of your earnest money differ for HUD homes.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.