The process of buying a HUD home differs from other residential real estate.  In general, it is important to know the requirements that HUD mandates its potential clients to meet, how offers are presented and the nuances that each contract may present, and the different types of properties that HUD sells to the general public.

HUD has classified purchasers into two categories:  1) owner-occupied buyers and 2) investors.  An owner-occupied buyer is a person that will occupy the property as his or her primary residence within 30 days of the close of escrow.  An investor is essentially everybody else—people looking to buy real estate as an investment, someone looking for a second home or someone who does not qualify as an owner-occupied buyer.

Before the bidding can take place, it is important to note that HUD requires all buyers to be pre-approved for a mortgage (unless you plan on paying cash for the property).  Pre-approval is the the conditional approval given by a mortgage lender after a formal loan application has been taken and the lender has verified the information provided (such as employment, income, credit, etc.  You can find more information on mortgages under the "Financing HUD Homes" section on the left).

If the buyer is a cash buyer, the buyer needs to provide sufficient evidence needs to show that the he or she has enough cash to purchase the home.  Sufficient evidence that the buyer should provide includes a bank statement, deposit slip, or a letter signed by a banker.

If the buyer is financing the purchase of a HUD home, pre-approved refers to someone who has applied for a mortgage and a preliminary loan commitment has been obtained for mortgage financing in a specified dollar amount sufficient to purchase the property.