If you’re trying to buy a home right now, the record-high prices in the residential market can feel overwhelmingly discouraging. It doesn’t mean you’re out of luck just because you’re on a tight budget, though. Instead of searching through insanely expensive listings, you may want to consider properties that cost significantly less: HUD houses, aka HUD Homes.

HUD homes or houses are properties that the U.S. Department of Housing and Urban Development (HUD) is selling to the public, having seized them after the original owners defaulted on their mortgages. As with any foreclosed property, these homes can be bargains, but they come with caveats, too. And of course, the fact you’re dealing with a federal entity adds some complications.

Here’s everything you need to know about becoming a HUD homeowner.

What is a HUD house?

While they’re called HUD houses, the federal government never actually bought or built these homes. Instead, HUD foreclosed on them after a borrower with an FHA loan failed to make their payments. While those foreclosures stopped throughout the pandemic, the number of HUD homes is likely to increase now as forbearance periods come to an end.

At the end of 2021, more than 660,000 homeowners with FHA loans were delinquent, according to HUD’s “Financial Status of the FHA Mutual Mortgage Insurance Fund FY 2021” report. And across all types of properties – not just homes with FHA-backed loans – foreclosures have already been increasing: More than 164,000 foreclosures occurred in the first half of 2022.

How do you find a HUD home?

Finding a HUD home is simple. You can visit the official agency website, the HUD Homestore (hudhomestore.gov) to see a state-by-state breakdown of properties currently available. Each listing includes a comprehensive rundown of details about the property, disclosure statements and contact information for the individuals involved with the sale.

How to buy a HUD home

Buying a HUD home starts with a similar step to shopping for any kind of home: Getting pre-approved for a mortgage (assuming you don’t have the deep pockets to make an all-cash offer). Obtaining a pre approval letter from a lender both gives you an idea of how much money you can borrow and demonstrates to sellers that your offer is serious.

With a firm idea of the funds you are eligible for, you can browse listings on the HUD Homes site to get an idea of what is available. If you do find a property that looks appealing, HUD recommends paying for a home inspection before making an offer. At the very least, your contract should be contingent on the findings of the home inspection to help you avoid buying a low-priced property that needs high-priced repairs.

When you’re trying to buy a HUD home, you won’t be able to do it alone. A HUD-approved real estate agent or broker is responsible for submitting your bid. “My best advice for buyers is to hire an agent that works for a HUD-registered brokerage and has been trained on the HUD Home purchase process,” Stuart Merida, associate with RE/MAX Terrasol in Dana Point, California, says.

At the end of the bidding period, you’ll find out if your offer has been accepted (HUD typically goes with the bid that nets it the biggest profit). If you’re the winner, you usually have between 30 and 60 days to finalize your financing and close the sale. Your agent will help guide you through completing the necessary paperwork, which they file: It can be complex and the deadlines are strict — that’s why it’s good to have a HUD Home specialist. Your lender will thoroughly review your finances to approve your loan. If all goes well, you’ll soon have yourself a new home.

Who qualifies for a HUD home?

Anyone can bid on a HUD house. But the system is geared toward individuals who will make it a primary residence.

When HUD homes are initially listed, they are typically part of an “exclusive” 30-day period mainly reserved for buyers who will live in the home – commonly referred to as owner-occupants. It’s part of an effort to limit these properties from being snapped up by house flippers and other real estate investors. However, if the 30-day window passes without any accepted bids, the home enters an “extended” listing period. Then, anyone – including fix-and-flip investors – can submit a bid.

If you see a “lottery” listing next to a home, you may be out of luck as an individual buyer for now: Those houses are reserved for nonprofits and government agencies.

Financing a HUD home purchase

Financing a HUD home involves a similar route to financing any home that needs some extra love. “The loan process is the same as with standard as-is sales,” Merida says.

He also points out that, in HUD’s eyes, all offers are created equal. “The bigger benefit is that HUD does not prefer one financing method over another,” Merida says. “For instance, HUD does not give preference to cash over financed purchases, or preference to a buyer using a conventional loan versus a buyer using a [government-backed loan].”

However, if you’re going with a commercial lender, be prepared for potential challenges based on the condition of the property. If the roof has serious issues or the septic system is broken, some banks or private mortgage lenders may not want to finance the purchase, or give you as much as you need.

If you’re thinking about going with a government-agency mortgage, a particularly good option is the FHA’s 203(k) loans. Since HUD homes generally do need repairs, the 203(k) program can let you borrow the money you need for the bid and additional funds to cover the costs of work you plan to do.

Pros and cons of HUD houses

Is a HUD home right for you? As you browse listings, weigh the benefits and drawbacks.


  • A good deal: “HUD homes are a great option for home buyers for many reasons,” Merida says, “but tops on my list are that they generally sell below current market value because the buyer pool is always significantly smaller than [for] standard or traditional listings.”
  • A more even playing field: One of the biggest frustrations of buying a home in today’s market is trying to compete against other buyers with seemingly bottomless pockets. Or, an individual seller might opt for an all-cash offer over yours that involves financing. However, HUD’s software system that evaluates bids simply cares about the price – not how you’re coming up with the funds.
  • Potential for appreciation: A HUD home might be cheap because it’s damaged. But for “buyers looking for sweat equity and a vision,” that provides an opportunity to create a home that, after renovations, will be worth a lot more down the road.


  • A money pit: Don’t expect the house to be in turn-key condition. Since the previous homeowner couldn’t keep up with mortgage payments, it’s likely they couldn’t pay to maintain the property, either. “Be prepared for some repairs,” Merida says. “Since HUD sells homes in as-is condition, what you see is what you get.” And if extensive, those repairs could diminish the “bargain” aspect of the property’s price tag.
  • Sight unseen: While listings will include some images, it’s important to note that there may be big issues with the home you can’t see. Some listings may have a property condition report that also includes some notes about the functionality of major areas like plumbing, electrical wiring and the septic system — and some might not. Even with an agent’s on-site visit and a home inspection, it’s often a bit of a leap of faith to buy a HUD house.
  • Occupancy rules: If you’re bidding as an owner-occupant (which gets you first dibs on listings), be aware you must plan to live in the home for at least 12 months, and you won’t be able to purchase a new HUD home for another two years.
  • Limited inventory: The number of available HUD homes in a particular area is usually small. You might see just one listing per state, and in some places, there aren’t any HUD homes at all. Of course, that to some extent reflects the forbearance-period hiatus on foreclosures. Now that it’s ended, a rise in defaults may end up adding inventory to the HUD Homestore.