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Property Appraisal
For an existing home, HUD's estimate of the appraised value is based on the condition of the house and recent sales of comparable properties in the neighborhood. If there are obvious, serious defects, the house must be repaired before HUD insures the mortgage.
If your house has not yet been built, HUD will base the estimate of its value on the plans and specifications for the house and the value of the land where it will be built.
Existing houses are generally sold "as is" unless the buyer and seller agree, usually in writing, to repairs. Since there may be hidden defects in a home, the homebuyer should carefully examine the house or have the house inspected by a professional home inspection firm and be satisfied of its soundness before purchasing. An appraisal is not an inspection, and HUD does not warrant the condition of the house you buy.
The Most Frequently Used FHA Mortgage Insurance Programs
Section 203(b) Home Mortgage Insurance. Section 203(b) of the National Housing Act is the most commonly used HUD single family program. This program is available in all areas of the country, provided a market exists for the property and the home meets HUD's Minimum Property Standards. You may use the Section 203(b) Program to purchase a new or existing one- to four-family home in both urban and rural areas.
A Section 203(b) mortgage may be repaid in monthly payments over 10, 15, 20, 25, or 30 years.
Section 234(c) Condominium Units. Section 234(c) provides mortgage insurance for buyers who wish to purchase a unit in a condominium project. The condominium may consist of more than one building, such as a group of row apartments, high-rise buildings, townhouses, or any combination of these structures.
When you buy a unit in a condominium, you will own one unit in a multi-unit project, and you will have a voting interest in the condominium association that governs the day-to-day operation of the project.
You will share an undivided interest with other owners in the common areas and facilities that serve the project and share the obligation to maintain them. All owners pay a monthly condominium fee to the association to maintain the shared common areas and facilities, including common land areas, roofs, floors, main walls, stairways, lobbies, halls, and parking spaces. This payment is separate from the regular monthly mortgage payment.
Any condominium project must be approved by HUD before you can purchase a unit using an FHA-insured mortgage. HUD requires that 51 percent of the units in the project must be owner-occupied before FHA will offer mortgage insurance for individual units in the project.
Section 203(k) Rehabilitation Home Mortgage Insurance. Section 203(k) mortgages allow you to purchase or refinance and rehabilitate a home at least one year old. A portion of the loan proceeds are used to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed.
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