In an effort to strengthen America’s communities, the US Department of Housing and Urban Development offers a substantial incentive for law enforcement officers, K-12 teachers, firefighters and emergency medical technicians through HUD’s Good Neighbor Next Door Program.
In return for a commitment to live in the property for 36 months as a sole residence, professionals in the afore mentioned industries are granted a seven day window of access to view and submit interest in properties that are available for purchase through the program, and are eligible for a 50% discount off of the list price of the home.
If you are interested in purchasing a home through the HUD Good Neighbor Next Door Program, you can find available property listings for your state here. Properties available for sale change frequently, so it is best to check the website regularly if you are in the market for a home. If more than one person submits an offer on a certain property, a selection will be made by random lottery.
So, how does the program work?
HUD requires that you sign a second mortgage and note for the amount they discount off of the property. No interest or payments are required on this second mortgage, as long as the home buyer fulfills the three-year occupancy requirement. You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement.
Eligible participants will receive a 50 percent discount off of the HUD appraised value of the subject property. For example, if HUD lists a home at $100,000, you can buy it for $50,000, provided you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your down-payment is only $100 and you may finance your closing costs. The program accepts FHA, VA, or conventional mortgages, or cash.
If the property selected requires repairs, the FHA 203(k) mortgage program can help home-buyers buy a home and still have enough money to rehabilitate or repair it. Repairs must cost more than $5,000 to qualify, and the cost of the repairs and the mortgage can be combined into a single monthly payment. FHA’s 203(b) program may also be a possibility, if needed repairs are under $5,000. It is always best to meet with a financial professional to discuss your financing options.
The biggest challenge I see in using this program is the caveat that, although there is no first time homebuyer requirement, one may not own any other residential real property at the time they submit an offer to purchase a home, or for one year prior to that date. For example, if you submit an offer to purchase a home on August 1, 2019, you may not have owned a home during the period prior to that, starting July 31, 2018.
Once you have fulfilled the three year occupancy requirement, you may sell the property and keep the profit. If you leave the employment that made you eligible for the discount at the time of purchase, there is no penalty, as long as you continue to occupy the property for 36 months. The program does require the use of a licensed real estate agent to purchase the home. If you have any questions or want more information about the program you can contact me any time.