First responders put their lives on the line on a daily basis – and programs have been established to thank them for their sacrifice. The Good Neighbor Next Door Program for first responders (HUD Housing) is a program intended to benefit both the community and those of us who serve and protect it.
When I first joined the police department, I heard a rumor about a program that let officers buy a home for way less than market value. I later found out it was called the Good Neighbor Next Door Program, sometimes referred to as the Officer Next Door Program.
But you know as well as I do that there’s always a catch to any great deal. Sure, you may be able to get a HUD home as a first responder for a fraction of the price – but what will it really cost you?
Everything You Need To Know About HUD Housing
I’ll give you insight into this program. If you buy a home in the Good Neighbor Next Door Program, you can bet that the neighborhood will be less than desirable.
The government entices good home owners, like you and I, to live in these rough neighborhoods by offering homes at a fraction of the price.
But is it worth it?
Everyone’s situation is a little bit different. Before you decide, let’s explore everything you need to know about this HUD program.
Benefits For First Responders And Teachers
There are many people in society that have a part in making the world a better place. Police, fire, and emergency medical technicians spend entire shifts trying to save lives and put families back together.
Don’t forget about the teachers. Teachers literally have the job of shaping our future. They have the honor of shaping our children and implementing morals and values into their lives.
These jobs are not to be taken lightly. They require great sacrifice.
The United States Department of Housing and Urban Development (HUD), understands the sacrifices teachers, emergency medical technicians, firefighters, and police officers make each day.
Because of these sacrifices, the HUD’s Good Neighbor Next Door Program was created specifically for those of us in these professions.
What Is HUD?
The Department Of Housing and Urban Development (HUD), was established on November 9, 1965, under President Lyndon B. Johnson’s War on Poverty. HUD was created as a Cabinet Department under the Department of Housing and Urban Development Act, and it combined various other older federal agencies.
HUD’s mission is to meet the housing needs of America by creating national policies and programs that make housing more affordable, enforce fair housing laws, and improve or develop decent homes and suitable communities.
HUD also gives Americans a voice concerning their home and environment at the Cabinet level. HUD is a huge advocate for home ownership for low-income and moderate-income families.
HUD supports families by creating programs and policies to help them find affordable quality homes. Some of HUD’s programs include:
- Community Development Block Grants
- Federal Housing Assistance Program
- Fair Housing Initiatives Program
- HOME Investment Partnership Act
- HOPE VI Program
- Section 8 Rental Assistance
- Good Neighbor Next Door Program.
The Good Neighbor Next Door Program
The Good Neighbor Next Door Program (GNNDP) is a plan that has been put into place to assist law enforcement officers, firefighters, teachers, and emergency medical technicians with the purchase of affordable and suitable homes.
The Good Neighbor Next Door Program is part of HUD’s mission to revitalize and improve specific neighborhoods by advocating for homeownership. To accomplish this, HUD allows qualified public sectors to purchase HUD-owned homes at a 50% discount.
Who Qualifies For The Good Neighbor Next Door Program?
Law enforcement, teachers, firefighters, and emergency technicians all qualify to be a part of the GNND program.
Law Enforcement
To qualify as a law enforcement officer, you must be a full-time employee of a law enforcement agency. The agency must be part of the federal government, a state, a unit of general local government, or an Indian tribal government.
In a nutshell, you must be sworn and have arrest powers that you use on a daily basis to make arrests for the lack of compliance of federal, state, township, tribal, municipal, and or county laws.
Teachers
To participate as a teacher, you must also be employed full-time. Teachers must work at a state-accredited public school or private school that serves students in grade levels pre-kindergarten through 12th grade.
Teachers must also teach in a private or public school that serves students in the same area as the HUD home they are inquiring to purchase.
Firefighters & Emergency Medical Technicians
In order to participate in the GNNDP, firefighters and emergency medical technicians must be employed full-time by a fire department or emergency medical services responder unit.
The employer must be part of the federal government, a state, a county, an Indian tribal government, or a unit of general local government that serves the area in which the HUD home is located.
For some of us, this may be a deal breaker – depending on where you work.
What Is A HUD Home?
A HUD home is a property that came into the possession of the Department of Housing and Urban Development at some point during the foreclosure process.
Most of the foreclosed homes that come into HUD’s possession are a result of a delinquent Federal Housing Administration (FHA) mortgage loan. When a person purchases a home or property with an FHA mortgage loan attached to it, the federal government has agreed to insure the loan for a private lender.
If the homeowner stops making payments on the FHA loan, the lender may decide to put the home up for foreclosure in order to recoup some of their loss.
When this happens, the lender can sign over the homeowner title back to the government in order for them to sell the home. This allows the lender to write off some of the debt they incurred when the borrower fell behind on payments.
After this, the home becomes a HUD home and is only available to purchase through HUD programs.
Do All HUD Homes Qualify For The Good Neighbor Next Door Program?
No, every HUD home does not qualify for the GNNDP. All HUD homes that qualify for the Good Neighbor Next Door Program must be single-family homes located in revitalization areas.
When they are identified, these properties are made available for purchase through the program for seven days.
What Is A Revitalization Area?
To be politically correct, revitalized areas are geographic areas that the United States Congress has designated for HUD programs under the provisions of the National Housing Act.
However, you and I both know this means the homes are located in rough areas.
There are three areas of criteria that Congress examines before a neighborhood is designated as a revitalization area:
- The average overall household income in the area
- The average homeownership rate of the area
- The Federal Housing Administration insured mortgage foreclosure is in the area
Those who qualify to be a part of the HUD Good Neighbor Next Door Program can see what homes are in revitalization areas by visiting the HUD Home Store.
The HUD Home Store serves as a listing site to view all of HUD’s real estate owned (REO) single-family properties. This site can be used by the public, real estate agents, state and local governments, and nonprofit organizations.
Below is a screenshot from a quick HUD home search in Arizona:
Real estate brokers and other approved organizations that are registered can also place bids on behalf of their clients who may be interested in a HUD home. On the site, you will use HUD’s single-family home locator which is a map that displays all of HUD homes in revitalized areas.
There are many revitalized areas around the United States and HUD is constantly working with localities to designate more areas.
How Much Money Do You Have To Put Down On A HUD Home?
Depending on the purchase price, the down payment will be between $500 to $2,000.
If the house you are interested in is listed for $50,000 or less, then your deposit will be $500.
If the home you wish to purchase is greater than $50,000, the necessary cash deposit will be somewhere between $500 and $2,000.
All deposits are determined by HUD according to their guidelines and policies.
Keep in mind, if you are interested in purchasing a HUD home, you are required to use a qualified HUD real estate agent regardless of how you found the home.
You can find a HUD real estate agent in your area by searching for one on the HUD’s website. Once you have chosen an agent, they can take you on a tour of the home you are interested in.
Seek Expert Advice
Depending on the condition of the home, you may want to take a contractor with you to get an idea of how much it will cost you to fix any damages. We have all seen how some of these foreclosures have been treated.
Unfortunately, you will not be able to hire a home inspector until after you have made your deposit. Keep in mind, your deposit is not refundable, so you want to initially make sure the home you are interested in is not only suitable but also worth the cost to fix.
Once you have found a house you are interested in, your real estate agent can bid on the home on your behalf. You can bid any amount for the home but the bid must be at least 1% of the list price in order to be valid.
If your bid is accepted it will be entered into a lottery. If your bid is chosen, a HUD representative will contact your agent. Once your bid is accepted, your agent must confirm your deposit amount with the property’s asset manager.
Your deposit must be certified funds such as a cashier’s check or money order, and it will be due within two days of your bid being accepted.
Be sure to have the funds ready before you make a bid.
How The HUD $100 Down Program Works
As noted, HUD will take care of 50% of the house listing sale price, so if the home is listed as $200,000, you will need to take out a mortgage for $100,000.
HUD will require you to take out a silent second mortgage in order for you to receive the discount. If you qualify for the FHA insured mortgage program, you will only be required to make a small deposit of $100.
In addition, all of your closing costs will be worked into your mortgage.
What Is The FHA Insured Mortgage Program?
The FHA, or Federal Housing Administration, is a government agency that provides mortgage insurance on loans that have been provided by FHA approved lenders in the United States and its territories.
The FHA is able to insure single-family and multi-family homes, hospitals, and residential care facilities. All FHA’s monies are self-generated, making it the only government agency to achieve this feat.
FHA mortgage insurance was set into place to protect lenders against loss if the property owner falls behind or is no longer able to pay their mortgage. This significantly minimizes the risk lenders take on.
If a borrower defaults on their loan, the FHA will endure the cost of any claims for unpaid principal balances and the defaulted mortgage.
What Is A Silent Second Mortgage?
A silent second mortgage is the second mortgage the government takes out on your home in order to fulfill the second portion of the balance due – the 50% sale price left over after your discount.
You are not required to pay interest or principal on the second mortgage, but you are required to sign for the mortgage and note. This second mortgage exists in the event you break the HUD contract. If this occurs, you will be responsible for both loans and the total price of the home without the 50% discount.
How Long A Person Is Required To Live In A HUD Home
In order to fulfill the requirements of the Good Neighbor Next Door Program, each occupant must live in a HUD home for a minimum of three years. This must be your primary residence and not a second home.
This is why it is so important for you to take a contractor with you when you are in search of a new HUD home. This will minimize the possibility of getting a home that requires far more renovation than you initially thought.
Is The Home Worse Than You Thought?
If you find yourself in a home that requires numerous repairs and you don’t have the cash on hand, there are separate government loans available to help.
The 203(k) loan is one of these repair loans you may qualify for. If you are approved, you can roll the amount of your loan into your mortgage so you are only required to make one payment.
However, if you want to save the most money, don’t roll the 203(k) into your main loan. Pay off the smaller loan as soon as possible to avoid paying large amounts of interest to the lender.
Verifying Occupancy
Once you sign for your mortgage and note, the National Servicing Center (NSC) will oversee your Good Neighbor Next Door contract. You will need to certify you live in your home each year as part of your agreement with HUD.
As part of the program, owners receive an annual certificate that must be signed, dated, and returned to the specified address in a timely manner. They will receive this letter each year around the anniversary purchase date of the HUD home.
If the letter is not sent back in a timely manner, the NSC will send a follow-up letter a month later.
If you do not sign or return either letter, the NSC will refer your case to be investigated, and an investigator will be sent to your home to verify the occupancy of the property. You will then be asked to sign the certificate in their presence.
If the investigator is not able to verify occupancy, your case will be turned over to the Office of Inspector General for further investigation. At this point, it is possible you may be prosecuted if your occupancy is not verified.
To avoid this, make a note of your anniversary purchase date so you don’t miss your occupancy certification. If any documents are falsified, you may be prosecuted for fraud – which doesn’t look good if you’re a first responder.
If You Are Unable To Stay In Your Home For 3 Years
In the event you are not able to stay in your home for the required three years, contact HUD as soon as possible. You will, unfortunately, be penalized for not fulfilling the contract between you and HUD.
You will still be required to pay for the 50% discount you received on a prorated basis. For example, if the total home price was $180,000 and your discounted portion was $90,000 – you will be on the hook for the full amount ($180,000).
When You Can Sell A HUD Home
As a participant of the GNNDP, you have to remain in your HUD home as a primary residence for three years.
Once you have reached the required occupancy period of at least 36 months to fulfill the agreement, you are free to sell your home and receive 100% of the profit.
You may also remain in your home or use it as an investment and rent it out. You will then become the landlord of the property and will be able to keep all the income made from rent payments.
In the most simple of terms, you can sell your HUD home as soon as you have fulfilled your agreement with HUD. This can vary depending on which agreement you signed and any additional terms included in your contract.
The HUD Home Buying Process
The process of initially purchasing a HUD home occurs pretty fast compared to purchasing a traditional home. But as you can imagine, since the government is involved, there are a bunch of hoops you have to jump through before you can close on a HUD home.
As mentioned prior, you must work with a qualified real estate agent that is registered with HUD before you are able to bid on a HUD home. Your bid, deposit, and financing are really what determines how soon or how easy it will be for you to purchase a HUD home.
If your bid is accepted and as long as you have your deposit ready and financing, the process is pretty straight forward from that point on.
How Long It Takes HUD To Accept An Offer
Through GNNDP, HUD homes are available for purchase exclusively for seven days. If your bid is accepted shortly thereafter, your real estate agent will be notified within two days.
How Long It Takes To Buy A HUD Home
In most cases, it takes thirty days to close on a HUD home, but HUD can extend the closing deadline if the purchaser needs more time to process paperwork or loan applications.
The extension must be in writing in order for it to be official. HUD also has the right to deny an extension request if there are any issues.
Can You Flip A HUD Home?
In general, yes, you may flip a HUD home but it depends on your definition of a “flip.” A “quick flip” is normally not possible due to the primary residence stipulations.
If you are purchasing a HUD home as a participant of one of HUD’s programs, you will have to abide by whatever agreement is placed in front of you before you can sell.
For example, before you are able to flip a home as a GNND participant, you will not be able to flip your home until after the 36-month living requirement has been fulfilled.
If you sign up for one of HUD’s other programs, you may have to stay for a year before you are able to flip your home,
Buying HUD Homes As An Investor
If you are going into an agreement with HUD as an investor, the process is different – but possible.
As an investor, you are still required to partner up with a HUD registered real estate agent and they are required to bid on a HUD home on your behalf. In general, HUD’s overall goal is to have homeowner-occupants purchase their homes rather than an investor.
Since this is their goal, HUD has what they call an “exclusive listing period” which forbids investors from bidding on a property for a 15-day period. Only owner-occupants, nonprofits, and government entities are allowed to bid during the exclusive listing period.
However, once the period is over, bidding becomes available to all bidders including investors.
Can I Pay Cash For A HUD Home?
Yes, you may purchase a HUD home with cash, but if you are purchasing a HUD home as a participant of a HUD program, you may be required to use a cashier’s check or money order.
Can You Negotiate A HUD Home Price?
You may offer less than the HUD home’s initial listing price, but generally, there is a lot of competition during this process. If your bid is accepted, there is no negotiating back and forth if you find the home is in need of repair.
HUD homes are listed in “as is” condition.
The HUD Program And Closing Costs
According to the HUD policies, HUD will pay the following closing costs:
- Outstanding property taxes and other unpaid fees such as Homeowner Association (HOA) balances and utilities
- HOA transfer fees
- Repair Escrow Fees of $200
- Half of the agent fees (only the HUD agent fees)
- Recording fees and charges for the deed
HUD may pay for the following costs:
- Appraisal Fee for a FHA loan
- $20 for a credit report
- Home Inspection
- Flood Certification
- Homeowner’s Warranty
- Loan Discount Points
- Loan Origination Fee (up to 1.5% on FHA loans)
- Recording Fees
- Title Insurance Coverage for Lenders and Owners.
As you can see, the closing costs that are covered by HUD can vary. In general, you are required to pay your realtor fees as well as some additional closing costs. On average, you can expect to pay 3% – 4% of the home’s final price in closing costs.
The Advantages Of Buying A HUD Home
- Purchasing a HUD home can be a great investment
- HUD home buyers will receive at 50% discount off of the sale price
- Owner-occupants have the opportunity to bid for a HUD home exclusively without worrying about being outbid by investors
- Investors have the opportunity to purchase a home far below market value
- There are a plethora of resources available for homeowners to purchase a HUD home
- If homeowners qualify for an FHA loan, they will qualify for the 100 dollar deposit program
- Closing on a HUD home usually takes thirty days
- Once a homeowner has fulfilled their agreement with HUD, they are free to sell their home and receive all profits
- Homeowners can turn their HUD home into an investment by renting their home out at the end of their agreement with HUD
- There are loans available to repair home damage and it can be rolled over into mortgage
- Deposits can range from $500 to $2,000
The Cons Of Purchasing A HUD Home
- If you are a participant of the Good Neighbor Next Door Program, you are required to live in your HUD home for at least three years, so if you are offered a job in a new state, you are still required to fulfill your agreement with HUD
- HUD homes are purchased as is, so your potential home may need a lot of repairs
- HUD homes are not listed for very long as they are purchased quickly
- As a primary residence in a revitalization area, it may not be the best option for law enforcement due to officer safety concerns and the security of their family
If you are a teacher, an emergency medical technician, a firefighter, or a law enforcement officer, purchasing your home through HUD’s Good Neighbor Next Door Program can be a great investment and a great way to give back for all of the amazing things you do.
If you’re willing to live in a revitalization area.
However, before you jump into any type of a purchase, be sure to know everything you can about the area before you enter into a contract. Subjecting your family to a rough neighborhood for a minimum of three years may not be worth it.
Use your training and experience to make the best decision about the neighborhood before you sign anything. Don’t put your family in danger just to save money.
General FAQ
Who Qualifies For The Good Neighbor Next Door Program?
Law enforcement, teachers, firefighters, and emergency technicians all qualify to be a part of the GNND program.
What Is A HUD Home?
A HUD home is a property that came into the possession of the Department of Housing and Urban Development at some point during the foreclosure process.
Most of the foreclosed homes that come into HUD’s possession are a result of a delinquent Federal Housing Administration (FHA) mortgage loan.
Do All HUD Homes Qualify For The Good Neighbor Next Door Program?
No, every HUD home does not qualify for the GNNDP. All HUD homes that qualify for the Good Neighbor Next Door Program must be single-family homes located in revitalization areas.
What Is A Silent Second Mortgage?
A silent second mortgage is the second mortgage the government takes out on your home in order to fulfill the second portion of the balance due – the 50% sale price left over after your discount.
How Long Is A Person Required To Live In A HUD Home
In order to fulfill the requirements of the Good Neighbor Next Door Program, each occupant must live in a HUD home for a minimum of three years. This must be your primary residence and not a second home.
