Understanding the Good Neighbor Next Door Program
A half-priced home may seem too good to be true, but this HUD program is the real deal. That means it comes with eligibility requirements, hoops to jump through, and pros and cons that you need to know about if you’re considering using it.
Who Is Eligible?
According to NerdWallet, the first thing to consider when determining eligibility is your profession. If you are employed as a full-time law enforcement officer, teacher, firefighter, or emergency medical technician, you may be eligible to participate in the program. If you meet that standard, then there are a few other hurdles to clear:
- Neither you nor your spouse can have purchased a Good Neighbor Next Door home before.
- Neither you nor your spouse can own any property now or within the year prior to bidding on a home in the program.
- You must purchase a home in the area that you serve.
- You must certify that you intend to continue working in your chosen profession for at least one year after your purchase.
- You must agree to live in the home as your sole residence for three years. You’ll receive a form from HUD annually that you must sign and return attesting that you are still living in the home.
How It Works
The properties that are up for grabs as part of the Good Neighbor Next Door program are single-family, one- to four-unit residential properties acquired as a result of a foreclosure on an FHA loan. They are offered for one week, so if you’re interested, you have to act fast. The Balance explains how purchasing a home with this program works:
- Search for eligible properties using HUD’s website. Remember that properties are only available for seven days and that you must choose a property in an area that you serve.
- Have your real estate agent or broker submit your bid. You must have a professional representative to participate.
- Offer the list price. This is required. If more than one person bids, the winner is decided by lottery. If you win, the discount will be applied later.
- Pay the earnest money. HUD sets a minimum of $500 and a maximum of $2000; 1 percent is customary. The earnest money will be applied to the purchase price. If the offer is rejected, it will be returned to you.
- Arrange your financing. You can use an FHA loan and make a down payment of just $100. However, you don’t have to stick with the FHA. You’re welcome to use any form of financing. You’re free to choose a VA, USDA, or conventional loan if it’s a better fit for your needs.
- Sign the silent second mortgage. You’ll need to sign a silent second mortgage for the other 50 percent of the house’s cost. As long as you meet the occupancy requirements, you won’t need to make any payments. However, if you decide to leave early, you’ll need to make prorated payments on this amount.
Pros and Cons
HomeLight points out that this program has both pros and cons. It’s a chance to snag a real bargain. Plus, the homes tend to be competitively priced, there are no income or credit standards, and buyers have control over their financing. Still, there are some drawbacks to consider. The lack of inventory can be frustrating. The homes are foreclosures, so there could be quality issues lurking inside their walls. In addition, the program’s process can be somewhat arduous. However, the potential for savings is very real. Ultimately, you have to decide if it’s worth it.
Are you purchasing a home with the Good Neighbor Next Door? Do you need to learn more about FHA loans, VA loans, USDA loans, or conventional loans? The team at PrimeLending Dallas is here to help. Contact us today to get started.