How to Buy a Hud Home: What You Need to Know
Part one of a four part guide to buying a HUD home
Most people dream of one day owning a perfect dream home. While some lucky folks make that hope a reality, there are plenty others who are left wanting for their dream. Fortunately for those folks, there are new, exciting ways to become a homeowner that are now becoming more common. One of those ways is through using the United States Department of Housing and Urban Development (HUD).Â HUD has a program in place that enables folks to purchase wonderful homes using a few easy to handle steps. For some people, this is the opportunity that they have always been waiting for.
How much can you pay for a home?
The first step to buying a home through HUD is to figure out exactly how much home you can afford. Though HUD makes the home buying process much easier and a lot more affordable, it still is not the cheapest thing in the world. Before you begin picking out that dream home, you need to know a price range and what sort of home you can afford. Without that knowledge, the rest of the home buying process becomes much more difficult.
Fortunately for potential home buyers, the Federal Housing Administration (FHA) has developed an easy to understand formula that should help potential buyers figure this out.Â Each individual situation is different; therefore folks must budget differently for their housing costs. The Federal Housing Administration estimates that people can budget around 30% of their gross yearly income to housing expenses, depending upon the amount of debt that they have. Families with absolutely no consumer debt can hope to budget 41% of their yearly income to their housing expenses.
Itâ€™s important to consider more than just the mortgage payment, though. Even though your gross monthly income might indicate that you can afford a $700 per month house payment, you will want to acquire a mortgage that is substantially less than that. In order to account for home taxes, the many various fees that you will pay, and the rising cost of inflation, you must budget for slightly below that estimated number. Coming up with the right number is something that will take a bit of research and some consultation with your finance professional.