Key takeaways

  • The Good Neighbor Next Door Program offers qualifying buyers a chance to purchase a HUD-owned property for half off the list price and a down payment as low as $100.
  • To qualify for a good neighbor mortgage loan, you must be a teacher, law enforcement officer, firefighter, or emergency medical technician and live in the area you serve.

Believe it or not, there’s a way to buy a home for half off the list price, and with a down payment as low as $100. For professionals in certain fields and residing in certain communities, the federal Good Neighbor Next Door program makes this home-buying scenario possible. Our guide describes who qualifies for the Good Neighbor Next Door, and how the program works.

What is the Good Neighbor Next Door program?

Good Neighbor Next Door is a community revitalization program, sponsored by the U.S. Department of Housing and Urban Development (HUD), for teachers, firefighters, law enforcement officers and emergency medical technicians (EMTs) buying a home in a specific area. Eligible homebuyers in these professions can purchase a qualifying HUD home for 50 percent off the list price – as long as they agree to live in the home for three years and meet a few other basic requirements.

The Good Neighbor Next Door program exists to make homeownership more affordable for public servants while helping to revitalize certain neighborhoods. There are a few limitations, however, including a small supply of available homes.

Good Neighbor Next Door program eligibility & requirements

Among the criteria for eligibility, teachers and first responders must certify that they plan to remain employed in their profession for at least one year after their closing date, and buy a home within the community they serve.

  • Teachers – You must teach full-time for a state-accredited public or private pre-kindergarten through 12th-grade school, and the home you plan to buy must be within your school’s district. If you work for a private school, your principal needs to provide proof that at least one student from the school lives in the neighborhood where you plan to buy the home.
  • Law enforcement officers – You must work in law enforcement full-time, either for a federal, state, local, or Indian tribal government, where you’ve been sworn in and have the authority to uphold the law. You must also serve in the locality where you plan to buy a home.
  • Firefighters – You should be employed as a full-time firefighter by a fire department within the federal, state, local, or Indian tribal government where you plan to buy a house.
  • Emergency Medical Technicians – You need to be a full-time EMT working for an emergency medical services unit within the locality where you plan to buy a home. You should be employed by a federal, state, local, or Indian tribal government agency in that jurisdiction.

Civilian personnel, dispatchers and volunteers are not eligible for the program.

In addition to the occupation-specific criteria, there are also a few other requirements that apply to all participants in the Good Neighbors Next Door program:

  • You can’t be a past participant in the Next Door Neighbor program.
  • You don’t need to be a first-time homebuyer, but you can’t have purchased or owned a home in the past 12 months.
  • The home you buy through the program must be your primary residence.
  • You must live in the home for the next three years and certify your residence every year during this period.

How the Good Neighbor Next Door program works

Here are the steps involved in the process of buying a home through Good Neighbor Next Door:

1. Get preapproved for a loan

Good Neighbor Next Door requires that you actually take out two mortgages: One is the mortgage from your lender financing the portion of the home you’re paying for (half-off list price); the other is a “silent” second mortgage that covers the discount, which has no interest and requires no payments or mortgage insurance on your part.

Once a HUD-qualifying home is listed, you have just seven days to place a bid, so it’s essential to get preapproved for a mortgage beforehand. Your choice of financing is up to you, but you’ll need to obtain an FHA loan from an FHA-approved lender if you want to be eligible for the $100 down payment.

The credit requirements for a mortgage will vary by lender, but most look for a minimum credit score of 560 to 580, according to Bruce Arrant, owner of Good Neighbor Next Door Realty in Denver, Colo.

2. Work with a HUD-registered real estate broker

Only brokers designated by HUD can submit a bid for you on a home. You can find a HUD-registered broker in your area through HUD online.

3. Start looking for a home

Eligible homes are listed online through HUD each week. You can search by state, county, city and even street, and in specific price ranges or for a certain number of bedrooms or bathrooms. Your HUD-registered broker might be able to sign you up for new listing notifications, as well.

Houses sold through the Good Neighbors Next door program are single-family, real-estate owned (REO) properties in HUD-appointed revitalization areas. Note that all homes are sold “as is,” so you won’t be able to negotiate repairs before you buy.

It’s important to note that inventory is limited, and some states may only have a few properties for sale at any given time. And since homes are only listed for a week, you should be ready to bid if you find one that appeals to you.

4. Submit a bid

Once you’ve found a home you like, your broker will submit a bid on your behalf in the amount of the full list price; HUD will apply the 50 percent discount if your bid is chosen. HUD selects winners by random lottery.

If the home is awarded to you, you’ll complete purchasing paperwork and pay an earnest money deposit totaling 1 percent of the list price, at minimum $500 but no more than $2,000.

The earnest money deposit must be made within two business days of winning the home, and be either a cashier’s check, certified check or money order.

5. Close on your new home

“You can expect to close on your new home within 30 to 45 days of winning the lottery drawing,” Arrant says. “Once the process starts, everything moves very, very quickly.”

If the home requires extensive repairs, HUD will give you up to six months to make them before you move in and start fulfilling your three-year residency requirement.

Note that HUD won’t pay for any of the closing costs or your broker’s commission, so you’ll need to have these funds prepared ahead of closing if you’d prefer to pay upfront. You can also finance these expenses by rolling them into your mortgage if you don’t have the cash handy.

Good Neighbor Next Door pros and cons

Weighing the benefits and pitfalls of Good Neighbor Next Door can help you decide whether the program is right for you.

Pros of Good Neighbor Next Door

  • You save 50 percent on the price of a home if you qualify for the program.
  • You’ll put as little as $100 down if you use an FHA loan to buy the home, and you can finance the closing costs.
  • You can roll your repair costs into the mortgage when you use a renovation loan such as an FHA 203(k) loan, which allows you to borrow up to 110 percent of the home’s appraised value to make upgrades.
  • You can build wealth quickly, becoming a homeowner at a significantly discounted cost.
  • You’ll help revitalize a neighborhood, which in turn could help improve home values.

Cons of Good Neighbor Next Door

  • The housing stock is extremely limited to just a handful of homes, as the home needs to be a HUD-owned property in a declared revitalization area.
  • You have to act quickly. Qualifying homes stay listed for only seven dayThe number of properties available is limited and the list of available properties changes weekly. After that, they go to the general market at full price.
  • You’ll lose money if you move out too soon. If you move out before the three-year tenure requirement is up, you’ll have to repay HUD to cover a prorated balance of your 50 percent discount based on what you still owe. So, if you receive a $50,000 discount on a $100,000 home and sell it after 18 months, HUD will take $25,000 — half the discount — from the proceeds of the sale.
  • You’re competing with other buyers. If more than one person puts in a bid on the house, the buyer is selected by random lottery.
  • Refinancing is tricky. It’s possible to refinance your mortgage, but only under certain conditions. Since your home has two mortgages, HUD will agree to a refinance if you’re looking for an FHA 203(k) loan, trying to get a lower interest rate, or to prevent you from defaulting on your first mortgage.

Alternatives to Good Neighbor Next Door

While the Good Neighbor Next Door program can be an option for certain types of homebuyers in specific areas, there is a very limited inventory of homes to choose from. Here are alternatives to consider:

  • Teacher Next Door program – Teachers and other school personnel (including administrators, maintenance workers and office staff) can receive grants of up to $8,000 through this program. They can also qualify for down payment assistance of as much as $10,681.
  • Private and nonprofit programs – The national Homes for Heroes program is one example that provides real estate services and housing assistance to first responders, military members and veterans, medical professionals and teachers.
  • Government loansFHA loans, VA loans and USDA loans are low- or no-down payment alternatives for first-time homebuyers, military members and veterans and others.
  • Down payment assistance programs – Private lenders as well as government programs offer grants and loans that community-based professionals can use to cover all or part of a down payment. These programs are often targeted at first-time homebuyers. You can search what options might be available to you on the Down Payment Resource website.
  • Union help – Some labor unions, including United Federation for Teachers, have partnerships that can provide assistance to help members become homeowners.
  • Assistance for nurses – Assistance programs like the Everyday Hero Housing Assistance Fund are available to help nurses and other workers like police officers and firefighters.

FAQs about the Good Neighbor Next Door program

  • These are geographic regions designed by HUD under the National Housing Act. To qualify for the Good Neighbor Next Door program, a home must be in a designated Revitalization Area. HUD uses household income, home ownership rates, and FHA-mortgage foreclosure activity as criteria when assessing areas.
  • No, you’ll be only able to use the program once, as its eligibility rules state you cannot be a past participant.
  • Yes, you can use grants and other down-payment assistance programs along with the Good Neighbor Next Door program.

Additional reporting by Mia Taylor