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Buying a HUD Home: What Is Insurable With Repair Escrow?

Posted on | October 6, 2011 | No Comments

When looking at HUD listings, you may notice some properties have a repair fee that makes the property FHA insurable. The Federal Housing Administration has standards on what condition a property must be in to allow the house to be sold using an FHA insured loan. Anything in disrepair that does not meet FHA’s safety requirements, must be fixed.

HUD does not make the repairs before they place a property on the market to receive bids. Instead, they require that the costs to be paid for by the buyer. These costs can add up to any amount less than ,000, and vary depending on the repairs that need to be made.

Home Repair

You cannot make the repairs on a HUD home while it’s in escrow, so you must fix problems with the property once you receive title to it. The money you pay to repair the property will come out of your pocket, but you will be reimbursed by your lender within 90 days after the close of escrow.

In order to receive money back from the lender, they must first set up a special repair account, which is added onto the the loan while you are still in escrow. Essentially, if you have ,000 in repairs that need to be done to the property, your loan will have the extra ,000 added onto it, which can be returned to you after the lender reinspects the property.

Some FHA properties do not require a repair fee and you will be able to tell because they are listed as “Insurable (IN)” and there will not be a repair fee showing on the listing. If you want to purchase a home through HUD with 3.5% down, but don’t want to make repairs on the property, it might take a little extra patience and time, but you are likely to find one that does not have extra requirements.

Buying a HUD Home: What Is Insurable With Repair Escrow?

Susan is a real estate agent in the Antelope Valley. She considers the best part of her job to be showing Lancaster and Palmdale homes. She also enjoys writing, reading, learning, and helping clients buy and sell homes in Palmdale.

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