One of the most common misconceptions is that HUD is a lender, and that a person who qualified for a HUD home is guaranteed the money to buy that home. HUD, in and of itself, doesn’t lend money at all. This agency does, however, guarantee payments to private lenders who offer mortgages to people who meet specific criteria. Why is that important? Most lenders have the responsibility of reporting to stockholders about decisions regarding approval of mortgages. A lender who chooses to offer a loan to a couple who barely qualify and who have no former credit with that lender may come under fire from the stockholders. But if HUD has guaranteed that loan, the lender can support the decision and the stockholders needn’t worry about the security of the loan.

But it’s important to note that the borrower is still required to meet minimum lending requirements. He or she has to come up with a down payment, pay closing costs and sign a contract to repay the loan. And the lender has the option to foreclose on a HUD home the same as for any other kind of loan.

Which brings up another common myth about HUD homes. Many people believe that a HUD home foreclosure means the only goal is to liquidate that property – and that’s where the myth that HUD homes can be purchased for $1. In truth, HUD will attempt to liquidate a home that has been repossessed for nonpayment, but not the appraised value of homes for that area. This is one place where HUD homes can be purchased at a real financial advantage.

If a HUD home needs repairs, HUD will take that into consideration. Typically, a person who purchases a home will be asked to put something down – often 10 or 20 percent. If the loan is for a HUD home in need of repairs, the cost of those repairs could be included as part of the down payment. The purpose is to allow the buyer to perform those needed repairs instead of requiring the full down payment. This is an effort to help those on limited incomes afford to fix up housing that might otherwise be substandard.

Though there are some fairly strict guidelines for qualifying for a loan secured by HUD, the homes are not necessarily at the bottom end of the area real estate market. There are some very nice homes in excellent neighborhoods that have been in the HUD program, thereby being dubbed “HUD homes.” That doesn’t mean that no one can every own those homes unless the owners qualify for the HUD program.

HUD is a program that has helped millions of Americans make the dream of home ownership a reality. There are many ways you can benefit from the purchase of a HUD home, but you first need to arm yourself with the facts.

Some people have the mistaken idea that a neighborhood of HUD homes is going to be a rundown area, filled with substandard housing and attracting more of the same. Take a look at some of the positive effects the HUD program has on a neighborhood.

One of the most important roles of the Department of Housing and Urban Development is to assist in home ownership. HUD homes aren’t owned by HUD, nor is HUD in the business of loaning money. What the HUD program does do is to provide a safety net for lenders who might otherwise see a particular client as too risky.

But how does that help with home ownership? Typically, the people who qualify for HUD programs are single parents, working people and often first time home buyers. They’re not the young professionals or upper income families. But does that mean that a neighborhood filled with homes owned by families who qualified for the HUD program is going to become a slum? Quite the contrary, home ownership is one of the most successful revitalization programs available.

A family renting a home is always less likely to care about the home and the neighborhood. If you put that same family into that same home, but add the incentive of home ownership through the HUD program, you’ll probably find a family that exhibits pride in that house. Instead of letting repairs go untended, the owner of a HUD home is more likely to spend the time, money and effort to make those repairs?

It’s the same principle being used by cities that encourage people to live downtown – a practice that was once discouraged. The idea was that having people live in an area of businesses gave people the right to be in those places after business hours. The result of moving people away from businesses was that only the thugs went to those areas at night, and crime rose.

When people returned to those areas as their primary residences, they had a vested interest in the community. They reported suspicious activities. Crime dropped as the residents’ pride in the community escalated.

The HUD program prompts home ownership, which in turn prompts pride in the home and community. If you own a home in an area and see that there are lots of HUD homes listed, you probably have no need to worry that it will have a negative impact on property values. It’s true that the HUD program prompts home ownership and that pride, but it’s also true that most people don’t know what homes in a community are on the official list of HUD homes. And for those HUD homes that are in need of repair (as some are), the HUD program allows for a smaller down payment or even eliminated the down payment so that the new owner has cash available to make needed repairs immediately.

The goal of the HUD program has always been to promote home ownership and the ownership of quality housing. HUD homes are typical good examples of that goal.