When a FHA (Federal Housing Administration)  loan goes to foreclosure and is taken back by FHA, they are in a hurry to sell that property.  Just like every lender, FHA is not in the business of owning and selling homes.  Since FHA wants to sell these homes as soon a they can, FHA offers specials to buyers to sell these homes faster.  One way of doing this is to offer buyer a $100 down loan to buy one of the homes that they are selling.  The FHA $100 loan program is available only on homes FHA currently owns.  Many buyers who qualify for a traditional FHA loan choose to take advantage of FHA’s offer of only putting a down payment of $100 on their owned homes.  This is a huge advantage FHA has over other programs.  Fannie Mae currently offers a similar program called HomePath, but it does require a larger down payment. 

The FHA $100 down program is very simple. Buyers should go to MCB’s (Michaelson, Connor, & Boul, Inc) website  http://www.mcbreo.com/buyerselect.htm to search for homes for sale by FHA.  MCB is the FHA property manager. On this website, buyers can search by City, County, listing prices, and zip codes for all of FHA properties that are for sale in Arizona, Colorado, Michigan, Montana, Nevada, Ohio, Utah, and Wyoming.  For other states please see HUD.gov.  Buyers need to be pre qualified by an experienced FHA loan officer who understands the FHA $100 down program.  Even thought it is easy for buyers to purchase these homes, the loan officer has to understand this process fully and be able close the loan on time. It is also highly recommended that buyers work with an experienced buyers agent.  FHA and MCB have a very strict process to make offers on homes and to perform the financing for these properties. 

Once a property is found that the buyer likes they should understand how to read the MCB listing since it is different than normal MLS listings.  The MCB listing will give buyers addresses of the properties, sales prices, sizes, number of bed/bath rooms and pictures like all other listings, but there is some very important additional information that buyers have to understand. 

• FHA Financing Section -this informs the buyer of how this property can be financed by a FHA loan.
  • Insured (IN) – This means the property in its current condition can be financed with a FHA loan with no required repairs. 
  •  Insured with repair escrow (IE) - This means FHA has determined that there are repairs needed to be completed before FHA will insure the loan.  Don’t worry most buyers can still buy these homes with out any additional money out of your pocket.
  •  Uninsured (UI) – This means that the repairs needed to make this home FHA insurable again are greater than FHA feels they will allow for a repair escrow.  These homes are true fixer uppers and will mostly be purchased with cash or a  non-traditional mortgage.
• 203K Eligible Section – this informs the buyer if the property is eligible for a FHA 203k renovation loan.
  •  For any property that is FHA Insured (IN) or Insured with repair escrow (IE), a qualified buyer can use a FHA 203K renovation to make improvements to this property. 
• Eligibility Section – This section lets buyers know who FHA is currently willing to sell this property to.  FHA is part of HUD and the main function of FHA is to help make affordable homes available to home owners.  FHA will take offers in the beginning only from buyers who are going to actually live in the property as their primary residences.  Then after a period of 10 days, FHA will open the bidding to local government agencies, non profit agencies and investors to purchase.  See FHA Investor for more details.
• Escrow amount (repair escrow)- this is the amount of money for improvements to the property that FHA thinks will make the home meet FHA minimum property standards.
  • To obtain a FHA loan, the property must be in safe, livable condition. 
  • The repair escrow is financed into the loan amount and after the buyer purchases the home the repairs that are required to be done will be completed and paid for.  Any additional moneys left over from the repair escrow will be applied to the buyers mortgage principal balance.  
•  Special Comments- this gives potential buyers important information about the property such as if the property is a Manufactures Home.
• Escrow Information – This shows potential buyers the specific cost break down for each repair FHA will require to make the home safe and livable and to meet FHA minimum property standards for a FHA loan.  After closing and repair completion, any additional money that is left over from the repair escrow will be applied to the loan balance.

An experienced agent will help buyers purchase these FHA homes.  On average these homes sell for 10%-20% less that other homes in the area.  These homes are great value and with the $100 down payment FHA loan almost anyone can afford to buy a home today.  The EEM (energy efficient mortgage)

 can also be applied to these FHA loans to pay for the cost of energy efficient upgrades.