Even if the experts are right about the cooling of the housing market, home prices are still too high for many. But if you’re a professional public servant, the US Department of Housing and Urban Development (HUD) may have a house you can afford.
Under HUD’s Good Neighbor Program, homes in areas needing economic and community development are offered at discounts to qualifying firefighters, emergency medical technicians, police officers and teachers.
The idea: When professional public personnel move into these “revitalization areas”, communities will be stronger and public safety will be improved.
Good Neighbor homes can be found across the US. They’re sold exclusively over the Internet, and you can place your bid through a real estate broker or directly with HUD. You’re required to bid the amount of the list price, but if your bid is selected, you can buy the property at a discount of up to 50%. Local and state governments may offer additional incentives.
There are some restrictions you should be aware of. For instance, you must work full-time in one of the professions mentioned above to participate in the program, and you can’t own another home at the same time that you’re purchasing your HUD home.
You’ll also have to live in the house for three years. Failure to do so means you’ll forfeit a portion of the discount.
To ensure compliance with the three-year-residency restriction, at closing you’ll be required to sign a “silent second” mortgage and note for the difference between the list price and what you actually pay for the house. That amount is known as the discount, and is what you’ll have to pay back if you stop using the house as your principal residence before the three-year requirement is met.
Good news: As long as you continue to meet the eligibility requirements, you won’t have to make payments on the silent second mortgage and note. Additionally, a portion of the discount is forgiven for each year of residency, with full forgiveness after three years.
Financing assistance is also available for Good Neighbor participants. The Federal Housing Administration (FHA) offers an insured mortgage with a low down payment and the ability to finance closing costs. And if the home you’re thinking of buying needs repairs, you may qualify for an FHA mortgage that combines the purchase price and necessary repairs into one loan and one monthly payment.