Buying A HUD Foreclosure
Housing And Urban Development [HUD] was set up to support American home ownership.
A HUD foreclosure is a foreclosure on a house in the HUD scheme, last purchased with an Federal Housing Administration [FHA] mortgage.
The Federal Government insured the loan, making the previous FHA loan possible.
By insuring the loan the Federal Government agrees to repay the Lender for all money lost by the lender in case the property is foreclosed on.
It’s a good deal for the Lender as their investment is 100% insured.
Mortgage Insurance Premium [MIP]
The Federal Government protects itself by collecting at the time of purchase, a Mortgage Insurance Premium [MIP] on each transaction of a federally financed property . The MIP is 2.25% of the mortgage amount.
Many more Americans can buy homes because the FHA can allow a purchaser to reduce their initial out of pocket cash expenditure from 5% to 3% of the purchase price.
MIP's are pooled to support Federal Government helping other homebuyers save money on their homes.
The MIP paid by all the prior home owners allows HUD to sell the foreclosed inventory presented on USHUD.com at a substantial discount.
Benefits of Buying an FHA Foreclosure