How to Buy a HUD Home

Written by Steven PorrelloFebruary 21st, 20239 minute read

At a glance: How to buy a HUD Home

  1. Get pre-approved. To bid on a HUD home, you’ll need a pre-approval letter from your lender.
  2. Find a HUD-approved real estate agent. Only HUD real estate agents can bid on homes.
  3. Browse homes in the HUD home store. Check the site every day, as HUD’s inventory fluctuates constantly.
  4. Bid on the HUD home. Your agent can help you place a competitive bid that’s within your budget.
  5. Get a home inspection and close. You have 15 days after your bid is accepted to inspect the house. During this time, you can cancel your contract if your home inspection comes back with too many costly repairs.

What is a HUD Home?

A HUD home is a foreclosed property that has been reclaimed by the U.S. Department of Housing and Urban Development (HUD). These properties were financed with FHA-insured mortgages, and HUD is selling them to recoup its financial losses.

Anyone can browse listings on the HUD home store. But you need a HUD-registered real estate agent to bid on one.

Owner-occupants (buyers looking for a primary residence) have 30 days during which they can exclusively bid on properties. Then HUD will typically open the bidding floor to everyone — including real estate investors, house flippers, and buyers looking for second homes.

When HUD acquires a property, the goal is to sell it as quickly as possible. Often that means accepting offers that are below the listing price, sometimes as much as 15% below. As a trade-off for the bargained price, HUD sells these homes “as is,” though you can still get an inspection before you officially close on the house.

Who should buy a HUD Home?

Low-income home buyers. HUD homes are usually more affordable than open market listings. Couple a HUD home purchase with a low- or no-down payment mortgage (e.g., from Fannie Mae, Freddie Mac, FHA, USDA, VA), and you could drastically relax home buying requirements.

Just be sure you conduct a thorough inspection, so you don’t buy a home that needs expensive repairs.

First-time home buyers. FHA foreclosures might help you buy a home in overcrowded markets that've priced you out. Since you'll have exclusive rights to bid on a home for 30 days, competition for the house could be lower and stay below market averages.

Fix-and-flip investors. Distressed properties and markets where HUD has more homes to sell than available buyers can present lucrative opportunities to investors. You have to wait at least 30 days before you can bid, however.

5 steps to buying a HUD home

Step 1: Get preapproved for a mortgage

Before you can start bidding on HUD homes, you need to get a mortgage pre-approval letter from your lender (unless you’re paying with cash—then, you need a proof of funds statement). Your real estate agent can’t place a bid without a mortgage pre-approval.

To get pre-approved, you’ll need to show your lender a few things:

  • Proof of income
  • Proof of assets
  • Employment verification
  • Credit report

Once your lender reviews these, they’ll specify the maximum you can borrow on a mortgage, along with loan terms and an interest rate. While pre-approvals don’t guarantee you’ll get a mortgage, they’ll show HUD that you’re serious about buying one of their homes.

What kind of mortgage do you need to buy a HUD home?

You can use a conventional mortgage, or any type of no- or low-down payment loan, such as FHA, VA, USDA, or Fannie Mae.

If the home is in bad condition, you may need to search out alternative loans (such as hard money loans), as many lenders require the home to be in good shape for traditional mortgage types.

Step 2: Find a HUD-approved agent

While anyone can peruse listings on the HUD HomeStore, only a HUD-approved real estate agent can make a bid on your behalf. To find one of these agents, you can use the “Broker Search” on the HUD homepage.

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Step 3: Find HUD homes on the HUD HomeStore

Browse for HUD homes on under "Search Properties." You can search broadly by state, or you can try to find a home within your specific market using city or postal code.

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If you’re an owner-occupant (i.e., not an investor) be sure to click “owner occupant” under “Buyer Type.” That way, you’ll benefit from the 30-day priority window.

Tips and tricks for finding a HUD home

Search for listings in your entire state. HUD’s inventory is often disappointingly low. If you can’t find a house in a specific zip code or city, broaden your search to the entire state to see where houses are available. You can use the map feature for easy visibility.

Check the HUD store daily. If you don’t see a home in your target market, don’t give up. HUD homes sell fast, and listings can fluctuate drastically from day to day. Be patient and keep checking the HUD home store for new listings. You never know where a HUD home will show up next.

Ask your agent to stay on top of new listings. The sooner you bid through your agent, the more likely HUD will choose you as the buyer. To that end, ask your real estate agent to inform you of new listings as they hit the market.

Pro tip: HUD automatically saves your most recent searches. You can use these "recent searches" to pull up listings in your target markets without having to type in criteria over and over. recent searches

Listing periods

As you’re looking at homes, you’ll notice each one has a “listing period.” This tells you who can bid on a property at a given time.

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Listing periods can change, but you’ll always see one of these four listed:

🏠 What it's for: uninsured homes, or insured single-family homes in certain revitalization areas

✅ Who can bid: HUD-approved nonprofits, government agencies, Good Neighbor Next Door participants

❌ Who can’t bid: owner-occupants and investors

🗓 How long it lasts: 7 days. If no one buys within this time, a lottery period turns into an exclusive listing.

🏠 What it's for: an exclusive bidding period for owner-occupants

✅ Who can bid: owner-occupants, HUD-approved nonprofits, government agencies

❌ Who can’t bid: investors

🗓 How long it lasts: 30 days, though HUD could prolong the period for certain properties. If no one buys within this time, an exclusive listing turns into an extended listing.

🏠 What it is: a competitive listing period during which all buyers can bid

✅ Who can bid: everyone

🗓 How long it lasts: indefinitely, or until someone buys the property

🏠 What it is: a vacant home with a market value of $25,000 or less, which HUD is selling to local governments for $1. These homes have been on the extended listing period for over 6 months.

✅ Who can bid: government agencies

❌ Who can’t bid: owner-occupants, investors, HUD-approved nonprofits, Good Neighbor Next Door participants

🗓 How long it lasts: 10 days. If the home doesn’t sell within this time, HUD will often put it back on an extended listing period.

Financing eligibility

HUD doesn’t require you to use a specific mortgage to buy their foreclosed homes. But the condition of the home itself could restrict your loan choices.

For homes that need significant repairs (more than $5,000), you may not qualify for certain government-backed loans (like FHA loans) or conventional mortgages. You’ll have to use alternative loans, like hard money loans or cash.

HUD will list if a home qualifies for an FHA loan under "FHA financing." listing information: fha financing

In this section, HUD will list three different codes:

These homes are eligible for an FHA loan. The property needs no obvious or significant repairs, and you can likely buy it with any type of mortgage.

These homes need basic repairs — totaling less than $5,000 — to meet minimum property standards. The home is still eligible for an FHA loan, but you’ll have to pay the repair costs up front (deposited in an escrow account at closing).

Because the repairs aren’t significant, you might be able to qualify for other government loans or conventional mortgages.

These properties need significant repairs to be livable, and the cost to rehab will likely exceed $5,000.

While uninsured HUD homes are not eligible for FHA financing, they may still be eligible for an FHA 203(k) loan. This is basically an FHA rehab loan, but you’ll need to deposit repair costs up front in an escrow account.

Step 4: Bid on the HUD Home

Once you find a home you like, let your agent know how much you want to offer and they’ll place a bid on your behalf.

If the home is within an "exclusive listing" period, then only owner-occupants can bid. An “extended listing” period, on the other hand, means the bidding floor is open to everyone, owner-occupants and investors alike.

How much should you bid on a HUD home?

For a house that you really want, bid close to the listing price — at least within 85–88%. You’ll most likely be competing with other home buyers, and if you bid too low, you risk losing the auction.

HUD is in no rush to sell. So if the highest bid on a property is 80% of the list price, HUD might keep the auction open for months before agreeing to it.

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Pro tip: HUD will cover up to 3% of your closing costs. But you must submit a request for that with your bid. Your agent can help you do this right.

Step 5: HUD accepted my offer — now what?

After HUD accepts your offer, they’ll notify your agent that you won the auction. You’ll be given a settlement date, typically 30 to 60 days after your agent submits your contract and HUD accepts it.

Closing on a HUD home isn’t much different than closing on a traditional home. But you should be aware of a few key differences.

You must submit an earnest money deposit

HUD will ask you to make an earnest deposit toward your closing costs with your contract. If the home sale price is:

  • $50,000 or less, you’ll submit $500
  • Greater than $50,000, you’ll deposit $1,000

Owner-occupants will get their earnest money back if they cancel within 15 days of their contract being accepted. Investors, however, will not get their earnest deposit back.

You have 15 days to cancel your contract

After HUD accepts your bid, you have 15 days to conduct an official inspection and cancel your contract if you find serious issues with the house. As long as you cancel your contract within this 15-day window, HUD will most likely return your earnest deposit.

HUD will pay for certain closing costs

HUD automatically pays for:
HUD may pay up to 3% for:
  • Prorated property taxes
  • HOA fees and transfer fees
  • Recording fees and transfer charges for the deed
  • Overnight mailing charges
  • Appraisal fees
  • Credit report (up to $20)
  • Flood certification
  • Home inspection
  • Home warranty (up to $250)
  • Loan origination fees
  • Real estate commissions
  • Recording fees
  • Title insurance

If you want HUD to pay 3% of these closing costs, you must request it on line 5 of the 948 HUD sales contract — when you submit your bid. If you don't request them with your bid, you'll have to cover closing costs yourself.

Buying HUD homes: Summary and next steps

  • A HUD home is a foreclosed property that the U.S. Department of Housing and Urban Development acquires after homeowners default on FHA loans.
  • HUD typically sells these properties at or below market value — as low as 85% of the listing price.
  • To find HUD homes, browse listings through the HUD homestore. You’ll need a mortgage preapproval and a HUD-approved real estate agent to place a bid on your behalf.
  • Home buyers have an exclusive 30-day bidding window on HUD homes. After this window closes, real estate investors and house flippers can place bids during the extended listing period.
  • If you’re the highest bidder, you have 15 days to conduct an inspection and cancel your contract if the home requires serious repairs.

Next steps for HUD home buyers

  1. Pick the right loan. If you have a low credit score, or low income, you might want to try FHA, VA, USDA, or Fannie Mae loans. Otherwise, a 15- or 30-year conventional loan might be the best choice.
  2. Get pre-approved. You need a mortgage pre-approval letter to start bidding on HUD homes.
  3. Find a HUD-approved agent. A realtor can help you shop around and find the best deal for your budget and needs.

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FAQs about buying HUD homes

Yes, you can bid lower than the asking price on a HUD home. Just keep in mind that HUD will most likely accept a bid that’s within at least 85–88% of the listing price. You’ll also be competing with other home buyers, who may bid higher.

Yes, HUD will give you 15 days to cancel your contract after they accept your bid. During that time, you can conduct a home inspection. If you discover the home needs more work than you originally thought, you can cancel the contract, and HUD will refund your earnest deposit.

When a homeowner fails to make their monthly mortgage payments, their lender will foreclose on the property. After the bank reclaims the property, it will file a claim with the Federal Housing Administration (FHA) for compensation for the loss.