How to Buy a HUD Home

When a homeowner defaults on a Federal Housing Administration loan, which by definition is backed by the U.S. Department of Housing and Urban Development, HUD pays off the loan and takes possession of the property. It then turns around and adds that home to its inventory of HUD homes for sale. Purchasing a HUD home can be a good investment, because many times HUD sells them under market value and gives the buyer access to special HUD-sponsored financing programs.

Search for available properties

Using the online search tool available on the HUD Home Store website, you can search for HUD homes for sale by state, county, city or zip code. Additionally, you can narrow down results by price range and number of bedrooms and bathrooms.

Arrange financing

HUD does not offer financing programs, so you'll need to pay with cash or secure a mortgage through an outside broker or through the FHA. HUD does, however, offer several special discount programs:

  • Good Neighbor Next Door Initiative: Law enforcement officers, firefighters, emergency medical technicians, teachers and nonprofits can purchase HUD homes located in revitalization areas at discounted sales prices. 
  • Public Housing Ownership Programs: Those utilizing public housing can trade rent payments for a mortgage by purchasing a HUD home as a discount


  • While you don't necessarily need to have your financing set up before you make an offer, getting pre-approved or pre-qualified helps you understand how much home you can afford. Having a pre-approval letter to submit with an offer makes you a more desirable buyer.

Make an offer

Only HUD-approved bidders can make offers on HUD homes. Look for a real estate agent who has gone through the HUD application process and has a name and address identification number, also called a NAID.


  • Owner-occupants typically have first rights in the bid process, but investors may bid after the exclusive listing priority period on a property ends.

Get an inspection

While HUD does not make repairs or give money to the home buyer for improvements, it does recommend that each buyer get an inspection. This allows you to see what repairs are needed and provides you with an estimate of additional costs you may incur beyond the purchase price. Your real estate agent can provide you with the names of local inspectors, or you can use the HUD's inspector database.


  • If you do buy a HUD property that needs repairs or renovations, the FHA offers a 203(k) Rehabilitation Loan that allows you to finance up to $35,000 in repairs and improvements as part of your mortgage.

Close on the home

You have the right to choose any closing agent you wish but if you use a non-HUD agent, HUD will not pay for the closing costs. During the closing you'll sign all the loan documents if you obtained financing, as well as all the HUD and settlement documents. If you have any questions regarding the process, you can contact the asset manager for that particular HUD property.