Affordable housing is considered to be less than 30% of a person’s income according to the Department of Housing and Urban Development (HUD). However, since the government knows it can be hard to get affordable housing, they have created affordable housing options through HUD. These options are designed to provide low-income Americans with an affordable option whether they want to buy or rent a home.
There are many ways the HUD offers affordable housing options. However, one of the most common methods is through foreclosed homes. HUD will feature foreclosed properties and put them up for sale. Applicants can purchase these houses through a HUD-approved broker.
Another popular affordable housing option is their Section 8 program. Section 8 offers housing assistance options to qualifying low-income applicants. This program provides vouchers for a set amount that can help with the costs of housing. Applicants interested in Section 8 assistance need to contact their local public housing authority (PHA).
Where to Find HUD Housing (Foreclosed Homes)
A lot of people can feel overwhelmed when trying to find HUD Housing assistance options that will work for their situation. Luckily, that doesn’t need to be the case. A person can view listings through the HUD Home Store. This “store” will show the newest available listings for all different types of properties. If you are looking to get a foreclosed home, then you will be able to filter your options by the location, number of bedrooms, price, etc.
Once you have reviewed a list of HUD housing options, you can then clean up your search. You will want to speak to a local mortgage broker and/or realtor to see what other information is available for the home and to learn about financing options as well.
There are programs available that can also help with getting an affordable HUD home. The “Good Neighbor Next Door” program offers a 50% price reduction to applicants that are teachers or first responders. The program will only be applicable if the applicant purchases a home in “revitalization areas”. The person you choose to help with this process (whether a realtor or mortgage broker) will be able to help you see if you qualify for programs like this with the home that you are interested in.
What to Know About Bidding on HUD Housing
Once you find a home that you are interested in, it is important to reach out to a licensed HUD broker. This broker will be able to bid on the property. You will only be able to get the HUD housing you are interested in if you are able to afford the property and can qualify for financing. HUD will not be able to provide you a loan. Instead, you will need to look at financing programs available like a Federal Housing Administration (FHA) loan. Many people look at this loan option because it only requires 3.5% down and a minimum credit score of 580. However, if a person wins a bid but does not qualify for financing, then they will move on to the next highest bidder.
How to Properly Finance a HUD Home
People that are interested in getting a HUD house will typically get their financing through FHA loans in order to buy the home. However, there are many different aspects that are taken into consideration when dealing with financing options:
- Financial History
- Employment History
- Credit Score
- Debt-to-Income Ratio
- Plans for the property
There are more aspects that are looked at, however, these are the main components that will decide how easy it will be to get financing if you are able to get any at all. There are also private lenders that you may want to consider if there are not federal financing options that work for your situation. Before you finalize any purchases, you want to make sure your home has been professionally inspected. Issues are commonly found in:
- The Roof
- The Walls
- The Floor
- The Foundation
- The Plumbing
- The Basement
- The Electrical System
- The Heating and Cooling System
Understanding Section 8 Vouchers
Since the HUD wants to offer a variety of options, they also have section 8 housing assistance if a person is not interested in buying a home. Section 8 is another name for the Housing Choice Voucher Program. This program will provide a voucher that covers any additional costs past 30% of a person’s income. For example, if a person makes $1,000 a month, then $300 of their income needs to go towards the cost of housing. The remaining amount will be covered by a voucher. The amount that is on the voucher is determined by the application you send in. Aspects like median income of the area you are looking to live in, family size, income, etc. will determine the amount of financial need.
The process to getting section 8 assistance is fairly simple. You will need to fill out a free application from your local PHA. If accepted, you will likely be placed on a waiting list. Waiting lists vary depending on the area you are in. However, there is currently an affordable housing crisis so the faster you get on those lists, the better. Once finished with the waiting list, you will be awarded a voucher based on the application you submitted. You will be able to move to any property that accepts housing vouchers. However, by law, an apartment complex does not have to accept that type of payment from a tenant. You will need to find a property that not only accepts housing vouchers, but also passes an inspection as well. Once approved, the tenant, the landlord, and the local public housing authority, all have a role to play.
The tenant must follow the rules of the lease and pay their portion of rent on time, the public housing authority must pay their portion of the rent on time and conduct inspections of the property to make sure it is up to code, and the landlord must continue to provide housing that reaches the public housing authority’s standards.
There are many affordable HUD Housing options available. It is important to take your time, and find what option would be best for you and your situation. If you have any questions, you can reach out to your local public housing authority and they will be able to provide you the assistance you need!