Skip to content

Loan Program Preview: Good Neighbor Next Door

January 12, 2014

CONVENTIONAL & UNCONVENTIONAL RESOURCE (2)

Program Description

Law enforcement officers, pre-kindergarten through twelfth grade teachers, firefighters and emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return, borrowers must commit to live in the property for 3 years as their sole residence.

Under the GNND Sales Program, single-unit properties acquired by HUD located in HUD-designated revitalization areas (except occupied properties, those located in Asset Control Areas or those that HUD has determined will be sold through an alternative sales method) will be made available to interested law enforcement officers, teachers, firefighters and emergency medical technicians prior to listing the properties for sale to other purchasers.

How to Participate

1) The borrower checks the listings for their particular state/area:

2) The borrower follows the instructions to submit their interest in purchasing a specific home.

  • Borrowers must offer the exact HUD list price when bidding on any GNND property. They will then receive a 50% discount off that list price.
  • If more than one person submits on a single home, a selection will be made by random lottery.

3) A sales contract is accepted by HUD.

  • The sales contract must indicate “Good Neighbor Next Door” to obtain the $100 down payment feature.

4) HUD requires that the borrowers sign a second mortgage note for the property discount amount. No interest payments are required on this “silent second” provided that they fulfill the three-year occupancy agreement.

Program Description

Law Enforcement Officers, Pre-Kindergarten through 12th grade Teachers, Firefighters and Emergency Medical Technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return, borrowers must commit to live in the property for 3 years as their sole residence.

Under the GNND Sales Program, single-unit properties acquired by HUD located in HUD-designated revitalization areas (except occupied properties, those located in Asset Control Areas, or those that HUD has determined will be sold through an alternative sales method) will be made available to interested law enforcement officers, teachers, and firefighters/emergency medical technicians prior to listing the properties for sale to other purchasers.

Assets

Minimum Down Payment: $100

Closing and Finance Costs:

Closing and finance costs may be financed into the mortgage amount

Earnest Money Deposit:

More than $2,000. HUD considers all offers to be a commitment to purchase a home if the borrowers are awarded the sale. If an offer is accepted, the earnest money deposit will be credited to the borrower at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale.

Homeownership Requirement

Current homeowners may not participate in the GNND program and they cannot have owned any residential real property for 12 months prior to lottery submission. A borrower is considered a current homeowner if their spouse owns a home or has owned a home within the last 12 months. Vacant land, vacant lots, timeshares and any mobile homes or travel trailers that are taxed as personal property are not considered residential real property in most cases.

Calculating the Base Loan Amount

The mortgage amount must be calculated as follows:

Contract Sales Price (Line 3 of REO Sales Contract)

50% HUD Discount (Line 8 of REO Sales Contract)

+ Financed Closing costs, Prepaids & Real Estate Commissions

  • Down Payment (minimum of $100 borrower contribution)     

= Base loan amount

Example:

$100,000 Sales Price

  • – $50,000 HUD discount

+ $9,000 financed closing costs, prepaids

  • $100 down payment

= $58,900 base loan amount

HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this “silent second” provided that you fulfill the three-year occupancy requirement. 

Acceptable Properties:

–  SFR (1-unit)

–  PUD

–  Condominiums

HUD Marketing Approaches: 

Insurable:

Properties marketed as “insurable” are those that meet FHA’s MPR for existing housing and MPS for new construction at the time of the appraisal in their “as-is” condition without repairs being necessary.

Insurable with Repair Escrow:

Ineligible with the Good Neighbor Next Door program

Uninsurable

Ineligible with the Good Neighbor Next Door program

Property Location:

School Teachers, Firefighters and EMTs are restricted to homes that are located in the area or District serviced by their employer. Law Enforcement officers are restricted to homes that are within a reasonable commuting distance since GNND homes must be their primary residence. Federal Law Enforcement Officers are the only UNRESTRICTED participants in the GNND program.

Revitalization Areas:

Eligible Single Family homes located in revitalization areas are listed exclusively for sale through the Good Neighbor Next Door program.

Search GNND-Eligible Properties: http://hudhomestore.com/HUDHome/GNND.aspx

Revitalization Areas: http://portal.hud.gov/hudportal/documents/huddoc?id=quartreviteareas063011.xlsx

Revitalization Area Evaluation Criteria: http://portal.hud.gov/hudportal/documents/huddoc?id=11-02hsgn.pdf

Under the GNND Sales Program, single-unit properties acquired by HUD located in HUD-designated revitalization areas (except occupied properties, those located in Asset Control Areas, or those that HUD has determined will be sold through an alternative sales method) will be made available to interested law enforcement officers, teachers, and firefighters/emergency medical technicians prior to listing the properties for sale to other purchasers.  Keep in mind that the property must meet HUD REO guidelines in the FHA Underwriting Guidelines

Warranty:

All GNND homes are sold “as is,” without any kind of warranty.

Q&A: Good Neighbor Next Door Sales

Question: What Is the Good Neighbor Next Door (GNND) Sales Program?

Answer: HUD wants to strengthen America’s communities. The Good Neighbor Next Door Program offers HUD owned single family (one-unit) homes to eligible participants at a 50% discount.

Question: Am I Eligible for the GNND Sales Program?

Answer: Law enforcement officers, teachers and firefighters/emergency medical technicians and who meet all other requirements of the program are eligible to purchase an available home.

Question: How Much of a Discount Can I Get on a HUD Home?

Answer: You can get a 50 percent discount off the HUD appraised value. For example, if HUD lists a home at $100,000, you can buy it for $50,000 provided, you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your down payment is only $100 and you may finance closing costs.

Question: What Kind of Mortgage Financing Do I Need?

Answer: You may use FHA, VA, or conventional mortgages, or cash. HUD requires you to sign a Second Mortgage and Note on the discounted amount (which is $50,000 in the example above). No interest or payments are required on this “silent second” mortgage if you live in the home for the entire 36 month occupancy period. You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement.

Question: What is the Occupancy Period?

You must live in the home as your sole residence for a full 36 months. The purpose of the program is to strengthen communities by encouraging employed, professional law enforcement officers, teachers and firefighters/emergency medical technicians to live in the community. You will have 30, 90 or 180 days to move into the home you purchase, depending on HUD’s determination of the condition of the home and the level of repairs that may be required, if any. The 30th, 90th or 180th day is the start date for the occupancy period. You are released from all obligations under this program at the end of the 36th month following the start date. HUD views the occupancy obligation seriously and vigorously pursues violators to the fullest extent of the law.

Question: What Is an FHA Rehabilitation Mortgage and How Can It Help Me Buy a HUD Home?

Answer: The FHA 203(k) mortgage program helps homebuyers buy a home and have enough money to rehabilitate or repair it. Repairs must cost more than $5,000. The cost of the repairs and the mortgage are combined into a single monthly payment. Consider FHA 203(b) program if needed repairs are under $5,000. FHA also has a new Streamlined 203(k) program which may be useful.

Question: Can I Sell the GNND Home after 3-years and Keep the Profit?

Answer: Yes. After you live in the GNND home 3 years, you can sell the home and keep any equity and/or appreciation.

Question: Do I Have to Use a Real Estate Broker or Agent to Buy a GNND Home?

Answer: Yes.

Question: Do I Have to Be a First Time Homebuyer to Take Advantage of the Program?

Answer: No. However, you may not own any other residential real property at the time you submit your offer to purchase a home and for one year previous to that date. For example, if you submit an offer to purchase a home on August 1, 2007, you may not have owned a home during the period from July 31, 2006.

Question: Where Are These Homes Located?

Answer: The HUD homes are located in designated Revitalization Areas. There are hundreds of Revitalization Areas located in the United States.

Question: Does HUD Provide a Home Warranty?

Answer: No. All GNND homes are sold “as is,” without any kind of warranty.

Question: Can I Buy Multiple Unit Properties (E.g., Duplexes, Triplexes, Etc.) through the Officer Next Door Program?

Answer: No. You can only buy single unit homes, townhouses, and condominiums through the GNND Program.

Question: Do I Have to Pay Earnest Money or Other Deposits in Order to Submit a Contract for a GNND Home?

Answer: Yes. The amount of the earnest money deposit required is an amount equal to one percent of the list price, but no less than $500 and no more than $2,000. HUD considers all offers to be a commitment to purchase a home if you are awarded the sale. Therefore, please carefully consider your offer and be aware of HUD’s policy on earnest money as stated here: If an offer is accepted, the earnest money deposit will be credited to the purchaser at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale.

Question: Can I Bargain with HUD on the Price of a GNND Property?

Answer: No. You must offer the exact HUD list price when bidding on any GNND property. Then you get a 50 percent discount off of that list price.

Question: What if I Leave the employment, that made me eligible, for Any Reason, during the Mandatory 3-year Residency Period?

Answer: Nothing happens, but you must continue to live in the home for the full 36-month mandatory occupancy period. If you move out of the GNND home, you will have to repay HUD on a prorated schedule. In addition, you must certify that it is your good faith intention to remain employed as a law enforcement officer, teacher or firefighter/emergency medical technician for one year beginning with your purchase. Do no attempt to participate in the program if you know in advance that you will not be employed as required for at least one year.

Question: Some Agencies Have Other Home Buying Programs. Can the GNND Program Work in Conjunction with These?

Answer: Yes, as long as you can meet all the GNND program rules while participating in these other programs.

Question: What Happens if a Participant Fails to Honor the 3-year Occupancy Requirement?

Answer: HUD can demand repayment of the discounted amount on a prorated basis. That means you would have to repay 1/36th of the discount you received for each month that you did not occupy the home. HUD also may initiate administrative sanctions including, but not limited to, barring the officer from participating in any HUD/FHA programs, as well as other federal programs. In any case of fraud or abuse, HUD will refer the case to HUD’s Office of the Inspector General for investigation and possible criminal prosecution. HUD may also notify the officer’s employing agency. Criminal prosecution and conviction for fraud and abuse concerning the GNND Program can result in a fine of up to $250,000 and/or two years in federal prison.

Question: How Does HUD Enforce the 3-year Residency Requirement?

Answer: The participant must certify he or she is living in the GNND home as a sole residence at the time of purchase and each year after that. HUD can conduct spot checks to make sure the GNND home is your sole residence at any time during the 3-year period. You also must sign a note and mortgage for the discount amount. HUD may foreclose this

Visit Our Website:  www.pmccanhelp.com/

FOR A FAST PRE-APPROVAL:
Complete a loan application on our website APPLY ONLINE

Job Opportunities? Now is the time to see how PMC Can Help you earn what you deserve!  Visit our Website and apply online today!  www.pmccareers.com

Follow our Mortgage on:
http://www.facebook.com/pmccanhelp
http://twitter.com/pmccanhelp
http://www.linkedin.com/in/pmccanhelp

Follow our Realty on:
http://www.facebook.com/pmcrealty
https://twitter.com/pmcrealty

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: