The closing costs for your HUD home are going to be pretty much the same as they would be on any other home purchase. The way you get those closing costs paid is a little different.
In most home buying situations, you can ask for the seller to pay part or all of your closing costs. Whether they do or not is part of the negotiations. FHA will only allow the seller to pay a maximum of 6% of the sales price. If your closing costs exceed this max, you are going to have to shell out for them yourself. With HUD homes, that maximum is 3%.
When you submit your bid on a HUD house, one of the required fields is requested closing costs. When looking at bids from owner occupants, HUD doesn’t really care how you get to the bottom line, but the bottom line is all that they are going to look at. Whether you’ve offered a little more on the purchase price while asking for the 3% or if you offer a little less planning to forgo the 3%, it doesn’t matter. The bidder who offers the amount that is going to get HUD the highest NET price will be the winner.
One problem that some folks run into on smaller purchases – especially those that are less than about $50,000 – is that 3% won’t cover all of the costs. If that’s your situation and you don’t have the cash to pay for the additional closing costs, and if you are a first time home buyer in Tennessee, THDA might be a good option for you. THDA can provide a 2% or 4% grant which can be used toward down payments or closing costs.
Buying a HUD home can be a great option for those who want a piece of the American dream of home ownership but don’t have a lot of cash saved up. Talk to an agent experienced in coming up with creative ways to help you achieve that goal (like me!).
You may be closer than you think.
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