HUD and FHA are currently running a program here in Michigan (and other states) in which you can purchase a home with a $1 down payment. That sure gets the phones ringing if you advertise "$1 down HUD homes!" but it certainly doesn't tell the whole story:
HUD requires $1000 earnest money deposit for a home priced at over $50,000, a $500 deposit for those less than $50,000. There is no getting around this - it is mandatory that a copy of this good faith deposit check (cashiers or certified funds!) is sent along with an accepted offer to purchase.
Did you bid higher than the FHA appraised amount on the home? If you did, and you are the winning bid, then you must pay the difference between FHA's appraised amount and the amount of your bid for the home. (This most often arises in multiple offer situations. Example: You bid $5000 higher on the home in order to be the winning bidder. If the appraised amount is less than your offer you have to pay the difference at closing in order to receive the loan)
At closing you will also be required to have a one year home owners insurance policy that has been pre-paid. Estimates here in the Metro Detroit area are anywhere from $400 to $1000 for a home up to $100,000 depending upon the type of coverage you want. Plan on having this money tucked aside in your bank account prior to bidding on a HUD home.
You will need much more than $1 to purchase a HUD home with an FHA mortgage. The program is simply a way for a home buyer to not have to pay the 3 1/2% down payment that is normally required by FHA. It does not mean that you won't have out of pocket expenses. Please don't let the small print fool you and plan accordingly: Have some money in the bank when you are ready to start looking for your new home.
If you are thinking of purchasing a HUD home in Macomb County MI please talk to your buyers agent about what to expect for out of pocket costs prior to beginning your search for the HUD home.
Kris Wales - Macomb County MI real estate
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I guess some buyers think they could buy for $1.00. Still could be a good program for buyers with limited resources and the ability to repair the home they are buying.