What is a HUD home? 2025 HUD home buying guide

What are HUD homes?

HUD homes are foreclosure properties owned by the U.S. Department of Housing and Urban Development (HUD).

These are homes that were originally financed using FHA loans, but went into foreclosure because the owners could not keep up the monthly mortgage payments. So HUD (which backs FHA mortgages) puts the homes up for sale.

If you keep an eye on HUD home listings and know the right process to buy one, you may score a great deal.

For qualified home buyers, HUD may even cover closing costs or discount the home price by up to 50%.

In this article (Skip to...) 

• HUD homes for sale
• Buyer requirements
• Buying a HUD home
• HUD home loans
• Pros and cons of HUD homes
• HUD homes for rent
• FAQ

Finding HUD homes for sale

You can find HUD homes for sale using the official HUD website, hudhomestore.com. HUD Home Store lists all HUD real estate owned (REO) single-family properties in your area.

It lets you search HUD homes for sale by state, city, ZIP code, or price — as well as home features like the number of bedrooms and bathrooms.

Remember when looking at HUD homes for sale that the properties are sold as-is, so you’ll likely want to order a home inspection before making an offer.

If you plan to buy a HUD home with a mortgage loan, we also recommend getting pre-approved with a lender before you put in a bid on the house.

HUD homes are sold to the top bidder with a qualified offer, and a pre-approval letter proves you can afford the full amount you bid.

“You may want to check with the auction ahead of time. You are often required to have cash in hand to purchase the home,” recommends Jon Meyer, The Mortgage Reports loan expert and licensed MLO.

What if I can’t find HUD homes for sale?

HUD homes only go up for sale when someone with an FHA mortgage defaults on their loan. So at any given time, there may not be any HUD homes available in your area (or at least, none you want to purchase).

But there are other government agencies that list homes for sale too, including:

• The Department of Veterans Affairs (VA)
• The US Department of Agriculture (USDA)
• The IRS
• The FDIC
• The US Army Corps of Engineers

Listings from these agencies can be limited. But if you’re looking for a deal on a foreclosed home, it may be worth keeping an eye on a few different posting boards like these.

How HUD home sales work

The U.S. Department of Housing and Urban Development insures FHA mortgages. That means HUD becomes the property owner if a loan defaults. When the owner of an FHA home can no longer make their monthly mortgage payments, the property is then foreclosed. The Federal Housing Administration then attempts to recover some of its losses by putting the property up for sale.

HUD uses a regional “management and marketing” contractor to prepare the building for sale and then market it. And buyers must use licensed real estate agents and Realtors to make their offers.

In other words, you’d actually purchase the home from HUD, not an individual seller.

This is not a deal in which you can influence the purchase price by writing a nice letter or finding fault with the house. Your chances of successfully buying a HUD home depend on making the highest qualified offer within the bidding period.

Qualifying for HUD homes

Pretty much any “owner-occupant” is qualified to bid on a HUD home for sale — meaning anyone who intends to live in the home full time. There are just two requirements to purchase a HUD home as an owner-occupant:

1. You plan to live in the home for at least 12 months after purchasing it
2. You have not purchased another HUD property in the last 24 months

Investors, on the other hand, aren’t qualified to bid on a HUD home unless 30 days have passed without a residential offer being accepted. This rule gives owner-occupants the first chance at HUD home deals before investors scoop them up.

How to buy a HUD home

Once a HUD home is put on the market, the Initial Listing Period begins. HUD opens the bidding and takes offers on the property.

Bids from prospective owner-occupants during the first 10 calendar days will be given the highest priority. And investor offers are only considered if no acceptable owner-occupant buyers make a bid for a property.

Steps to buy a HUD home include:

1. Find a HUD home online, or by contacting a local real estate agent or HUD’s Management and Marketing Contractor in your state
2. Do a visual inspection of the home to ensure there are no obvious issues
3. Get pre-approved if you plan to buy the house with a mortgage
4. Enlist a HUD-approved real estate broker to put in a bid for you (required)
5. Request an official inspection once your offer is accepted, and make sure your contract allows you to back out if there are major problems
6. Submit your sales documents within two days of the offer being accepted
7. Close on the loan before the “settlement date” provided by your HUD broker
8. Move into your new home!

The sales broker will be key to navigating your HUD home purchase. They place your bid, notify you if it’s been accepted, and submit your sale documents. And they’ll be there to answer any questions you might have along the way.

Financing options for a HUD home

All HUD homes were previously financed with FHA mortgages. As the new owner, you don’t necessarily need to buy your HUD home with an FHA mortgage, although it may be easier to qualify under that loan program.

FHA loans generally offer flexible mortgage approval guidelines for buyers with lower credit scores and less money down. These loans are especially popular with first-time home buyers.

HUD homes that have been unoccupied for a long time may also be in need of repairs. If your HUD home requires major renovations to make it safe and habitable, consider the FHA 203(k) program to cover the purchase plus renovation costs.

Keep in mind that if you finance the purchase of a HUD home with an FHA loan, you’ll need to pay mortgage insurance for the life of the loan. But you can later cancel your mortgage insurance premium with a refinance into a conventional loan.

Other low down payment financing options to purchase a HUD home include:

• VA loans with zero down
• USDA loans with zero down
• Conventional loans with as little as 3% down

According to HUD, the sale usually needs to close within 30 to 60 days of your offer being accepted. As such, it’s a good idea to be pre-approved for your home loan before you start bidding.

You should also keep your loan file up-to-date with current paycheck stubs, account statements, and so on.

HUD can help you buy the house

If your offer on a HUD home is accepted, HUD may help you pay the closing costs on your mortgage.

HUD says it will cover closing costs equal to up to 3% of the sales price. The only caveat is, you cannot use this offer if you’re buying the house with HUD’s Good Neighbor Next Door Program (which discounts the home by up to 50%, anyway).

For HUD to pay part or all of your closing costs, you must request assistance on Line 5 of form HUD-9548, the “Sales Contract Property Disposition Program.”

HUD may also be able to assist with your down payment. The agency won’t cover your down payment directly, as it does with closing costs, but HUD does provide funds for other government programs that offer down payment assistance.

Find down payment grants in your state using this resource from HUD.

Remember, HUD homes aren’t always a deal

You can get a screaming deal on a HUD home if you qualify for HUD’s Good Neighbor Next Door program. If you meet its guidelines, you may be eligible for a 50% discount on HUD homes located within designated revitalization areas.

To apply for the program, you must be a law enforcement officer, teacher, firefighter, emergency medical technician, or meet guidelines for programs established by nonprofits and local governments.

However, if you don’t qualify for any special program, don’t expect a HUD foreclosure to be deeply discounted.

Understand that a foreclosure or short sale is not some sort of code for steep discounts. In fact, HUD’s own guidelines state that it has a legal obligation to get a fair price for the property to protect its insurance fund (and U.S. taxpayers).

“Buyers should double check whether or not they’re required to cover any additional unpaid liens on the property,” adds Meyer.

Buying HUD homes: Pros and cons

Buyers may be able to get a great deal on a HUD home. But like any foreclosed home purchase, HUD homes aren’t without risk. Here’s a brief overview of the pros and cons of buying a HUD home:

You can read about the benefits and drawbacks of buying a HUD home in greater detail below.

Advantages of buying a HUD home

HUD homes might not always be deeply discounted. But pricing aside, there can be real benefits to buying one of these houses:

• You don't have to deal with competition from investors. If you’re planning to purchase a home that will be your primary residence, you won’t have to worry about investors beating you out with a cash bid. For HUD homes, owner occupant buyers have a 30-day window in which investors are not allowed to bid
• You may have assistance with closing costs. HUD may cover buyers’ closing costs of up to 3% of the purchase price; this must be negotiated during the bidding phase
• There is less haggling. When going through the process of buying a HUD home, there is no back and forth with a seller to try to negotiate price. Instead, the highest acceptable owner-occupant offer will be chosen

What is this “highest acceptable” number? HUD does not say on its website. However, a 2015 analysis of 300 sales nationwide found that on average, houses remained on the market fewer than ten days and sold for more than 95% of their list prices.

You are, however, allowed to present any offer you wish.

Next, take a look at some of the potential drawbacks of a HUD home purchase.

Disadvantages of buying a HUD home

Like any other foreclosed property, there are also some risks inherent to buying a HUD home. These can include:

• Prices might not be as favorable as you think. Research carefully to avoid an unwise investment. Use widely-available online tools to find out what the neighborhood is like. See how nearby, comparable properties are priced, and what the former owner paid for the home
• Buyer beware. Even if you discover that the listing price is fantastic, understand that HUD homes are sold “as is.” Do a visual inspection before submitting your bid. Once you’re under contract, order and pay for an inspection to determine if the property needs major renovations or has structural damage. Your real estate agent or Realtor should write an offer that protects your interests if any major issues come up
• Time can make problems worse. Many foreclosure properties are unoccupied for some time before the official legal filing. The longer they sit, the more problems can worsen. Whether it’s a roof leak, mold in the basement, or unruly landscaping, consider the cost of deferred maintenance when you make an offer

The most important thing here is that you get home inspection before you purchase a HUD home.

And make sure that your offer includes language protecting you in case the sale falls through due to problems discovered during the inspection.

No matter how good a deal you find on a HUD home, it’s never worth investing in a property that could have surprising — and costly – structural issues down the road.

HUD homes for rent

HUD does not own homes for rent, meaning you cannot rent a house or apartment directly from HUD. However, HUD does offer some rental assistance programs to help make housing more affordable for low-income families.

HUD-subsidized rental programs include both privately- and publicly-owned buildings. And HUD’s Section 8 voucher program lets qualified renters select their own home and receive assistance on their rent. Learn more about HUD’s rental programs here.

HUD homes FAQ

Get the best deal on a HUD home

Your dream of homeownership may be within reach, thanks to HUD.

Keep your costs down by comparing several loan offers and getting pre-approved before shopping for a HUD home. You can get started here.