FHA Good Neighbor Next Door Home Loans

Have you heard about the FHA Good Neighbor Next Door Program? If so, then you know it’s a special program operating under the auspices of the Department of Housing and Urban Development, or HUD, and is aimed at specific HUD-identified areas.

Who is Eligible?

This program allows law enforcement officers, pre-K through 12th-grade teachers, firefighters and emergency medical techs to buy homes at greatly reduced prices. Those eligible are then to buy one of these homes at half the listed price. That’s right…half. These homes are offered for sale by HUD.

The eligible properties must be located in what HUD refers to as “revitalization” areas and intended to promote and expand homeownership opportunities. The FHA Good Neighbor Next Door program is part of the National Housing Act passed by Congress.

Borrowers who qualify for this program should have a minimum credit score of 600 and commit to living in the property for three years. The discount is made through a second lien attached to the property in the form of a second mortgage. This second mortgage requires no monthly payments from the borrower and is forgiven at the end of the three year period. At the end of the three year period, the borrowers are then able to own the original 50 percent discount. The minimum down payment to purchase one of these identified properties is just $100.

FHA Good Neighbor Next Door: How it Works

As it relates to closing costs, standard closing costs will apply much like any other loan program. If you’d like a list of estimated charges, simply give us a call and we’ll provide you with a Loan Estimate highlighting potential charges, current market rate and monthly payment. This program does allow borrowers to finance common closing costs.

Because this is an FHA loan there are also mortgage insurance premiums that provide a loan guarantee to the lender. There is an upfront fee that is currently 1.75% and is rolled into the loan amount and does not have to be paid for out of pocket. The other mortgage insurance premium is an annual premium that is paid back in monthly installments along with the mortgage payment.

Borrowers who identify an eligible property and the offer is accepted, they can choose from a variety of loan terms from fixed-rate programs up to 30 years as well as a hybrid option. A hybrid is an adjustable-rate mortgage that is fixed initially for a predetermined period. A 5/1 hybrid has a fixed rate for five years before turning into an adjustable-rate loan that can change once per year.

Find Out if You Qualify

If you’re eligible to take advantage of the Good Neighbor Next Door program you should really consider exploring this opportunity. Very low down payment, competitive rates, ability to finance closing costs and a 50 percent discount is very hard to beat. Call me for more information and I can walk you through the program and help guide you to HUD’s revitalization areas.