Home prices in the US are hitting record highs, with the national median hovering around $438,108 in 2025, a 1.3% increase from last year. With interest rates fluctuating, the pressure on buyers and flippers are more intense.
However, there are more affordable alternatives like tiny homes, prefabricated houses, and HUD homes. The government sells these homes after foreclosure, often at a steep discount. Think $30K to $70K in potential savings, just for knowing where to look.
What Is HUD Housing?
HUD housing refers to properties owned by the US Department of Housing and Urban Development. These homes are typically acquired after a borrower defaults on an FHA loan and the property goes into foreclosure. HUD then resells the home to recover the financial loss.
HUD often lists these homes below market value, which makes them appealing to first-time buyers and investors. Buyers submit bids through HUD-approved agents, and in many cases, HUD reserves certain properties for owner-occupants before allowing investors to place offers.
What Is a HUD Home?
A HUD home is a property taken back by the US Department of Housing and Urban Development (HUD) after foreclosure on FHA loans. These HUD foreclosed homes are listed on the HUD Home Store and sold “as-is,” or often below market value.
Priority bidding is given to buyers who intend to live in the home, not investors. These HUD homes for sale are available only through HUD-approved agents and online listings. A HUD house can be a great opportunity for budget-conscious buyers or renovators looking for HUD housing for sale.
What Are Pros and Cons of HUD Home?
✅Pros of Buying a HUD Home
There are certain advantages to HUD houses:
- Since HUD homes are foreclosed, they sell for less than the current market price.
- The HUD prefers primary homebuyers over investors by allowing them to start bidding on the property 30 days before the bidding opens for investors.
- The Department of Housing and Urban Development provides closing cost assistance of up to 3%, subject to fulfillment of certain conditions.
- The HUD also allows homebuyers to pay lower down payments under its incentive programs, like the HUD $100 Down Payment Program.
❌Cons of Buying a HUD Home
The following are the drawbacks of HUD property:
- Since the previous owner couldn’t keep up with the mortgage payments, it’s most likely that you get a house in bad condition.
- You’ll have to spend money on hiring a HUD-approved real estate agent. Only they can bid on HUD properties on your behalf.
- You, as an owner-occupant, must live in the house for at least a year else you won’t be able to buy a HUD home for another 2 years.
Who Qualifies for a HUD Home?
- There are no strict qualification requirements to buy a HUD home.
- Anyone with sufficient funds or financing can bid on HUD properties.
- Investors can also purchase HUD homes, but HUD gives priority to owner-occupant buyers (those who intend to live in the home) during the initial bidding period.
How Do You Purchase a HUD Home?
Buying a HUD home starts by visiting the official HUD Home Store, where you can browse HUD homes for sale near me. However, only HUD-approved real estate agents can place bids on your behalf. So you’ll also need a pre-approval letter to get started.
Once you find a home, your agent submits an offer during the initial bidding period, priority goes to buyers who plan to live in the house. If your bid is accepted, you’ll need financing, complete the paperwork, and close the deal. HUD homes are sold as-is, so a home inspection is strongly recommended.
What Are HUD’s Incentive Programs?
To encourage people to buy HUD homes, the HUD offers a few incentive programs here are as follows:
- Good Neighbor Next Door: This program primarily aims to help public servants become homeowners. The program waives 50% of the purchase price on homes in revitalization areas.
- One Dollar Program: Through this program, low-to-moderate-income families can get homeownership of HUD homes. These homes have been on the market for more than 6 months for only $1.
- Non-profit Program: This program offers up to 30% discount to HUD-approved Non-profit organizations.
- Housing Choice Voucher Program (Section 8): This program eliminates FHA’s requirement of a 5% downpayment allowing owner-occupants to buy homes with a down payment of $100 on HUD homes.
Should I Buy a HUD Home?
A HUD home can be a smart choice if you’re looking to buy a house at a lower cost compared to traditional listings. These homes are usually available on the official HUD website. All you need is a HUD-approved real estate agent to place a bid on your behalf.
However, many HUD homes are sold as-is, which means they may require repairs or renovations to become fully livable. In some cases, it might not be worth the investment. So, it’s highly recommended to get a home inspection before making a final decision.
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