HUD has three listing codes that you will need to understand when buying HUD
Homes. These three listing codes will determine which type of financing you can use and if you
have to put money in escrow for repairs.
The listing codes for buying HUD homes are mostly for FHA loan mortgages. They also will give you
some ideas as the condition of the HUD homes. There are 3 listing codes you need to know when buying HUD homes.
HUD Owned Homes | 3 Listing Codes You Need To
Know
These properties are eligible for insurance under Section 203(b) of the National Housing Act which is a straight
FHA loan mortgage. It is also called a FHA 203(B).
An interest rate will be charged on the loan and is negotiable between the purchaser and lender. The mortgage
may include some mortgage insurance payments. The originating lender is responsible for making final determination
whether a property meets Minimum Property Standards and, consequently, is eligible for FHA insurance.
2. The next code is "IE" which means Insured with Escrow
Repairs.
This code means that are some repairs needed before you can get a FHA loan mortgage on the HUD
owned homes.
Properties listed as "Insurable with Repair Escrow" are eligible for an FHA 203(b) insured loan. The lender
making the new FHA loan mortgage establishes an escrow for the amount of the
repairs which includes a 10% contingency, not to exceed $5,500.
The identified repairs are required to meet FHA's "minimum property standard" (MPS) and the total repair costs
should be equal to or less than $5,000. If a 203(b) FHA insured loan is used for financing, the repair escrow must
be used for the needed work specified in the listing.
This code does not apply if you are buying HUD homes with a conventional loan or paying cash
Repairs must be accomplished within 90 days of closing and be monitored by an FHA lender. The lender will
inspect work as it is completed on the house and distribute the repair monies as appropriate within ninety (90)
days of closing. The costs of repairs are included in the loan amount and repaid by the borrower as part of the
monthly payment.
Any funds in the escrow account not used for the repairs will be applied to reduce the unpaid principal balance
of the loan.
3. The next code is "UI" which means Uninsured.
Properties listed as "UNINSURED" means that certain repairs and or improvements are required to be eligible for
an FHA 203(k) mortgage when buying HUD homes. The required repairs on most of these properties exceed $5000.00.
Purchasers of these HUD homes have the option to purchase "as-is" with cash or conventional financing. These
properties may be eligible for a FHA 203K Mortgage or a Streamlined FHA 203K Loan if the required repairs and or the improvements are completed
in accordance with FHA guidelines.
Again these listing codes are for FHA insured loans and not for conventional or insured conventional loans for
buying HUD homes.
