When shopping for a home, it’s important to pay a price that fits your budget. But what if you could get a home at a discount of 50% off the list price? That’s a deal that doesn’t come along too often—unless you know where to look.
The U.S. Department of Housing and Urban Development (HUD) offers such a deal, if you qualify. It’s called the Good Neighbor Next Door Sales Program, and it’s designed to encourage members of certain professions to move into and put down roots in particular areas.1
If you’re a teacher, law enforcement officer, emergency medical technician, or firefighter, you might be eligible to participate. Here’s what you need to know.
What Is the Good Neighbor Next Door Program?
Single-family homes, townhouses, or condominiums located in zones designated as revitalization areas can be listed for sale in the program, and are available for purchase for up to seven days.1 The program is designed to attract certain professionals to become part of these neighborhoods.
If you meet the requirements of the program, you can submit your interest for the home (follow the instructions for that specific property). After HUD verifies that you qualify, you can buy the home at 50% off.1 So, if the home’s listing price is $150,000, for example, you can buy it for $75,000. However, if more than one eligible buyer submits an application through the program for the same home, a random lottery is used to determine who will receive the opportunity to make the purchase.1
Revitalization areas are those that receive the designation based on the National Housing Act, which is determined by household income in the area, the rate of homeownership, and the amount of foreclosure activity on Federal Housing Administration (FHA) insured mortgages.2 The idea is to encourage expanded homeownership in a revitalization area in the hopes that other economic opportunities will follow.
Who Is Eligible for the Program?
In order to be eligible for the Good Neighbor Next Door program, you must be engaged in one of the following professions:1
Teaching (grades pre-K through 12)
Emergency medical technician
You also have to agree to live in the home as a primary residence for 36 months.1 Depending on the situation, you will have to move into the home within 30, 90, or 180 days. If you can comply with these requirements, on top of being a member of one of the eligible professions, you are likely eligible to participate.
Additionally, you can’t own residential property at the time you apply for the program. You also can’t have owned a home for a year prior to your offer to purchase a home in this manner. The house you’re purchasing must be your primary residence.
There are no income limits or minimums for the Good Neighbor Next Door program. You only have to meet the requirements for the mortgage financing program you’re participating in.
Check with a lender or mortgage broker to see what you qualify for, so you have an idea of what credit and income criteria you need to meet.
The good news is that, once you’re in an eligible residence, if you leave your profession, you won’t have to give up the home. You just have to complete the required occupancy period in order to avoid having to make payments on the discounted portion of the home purchase price.1
How to Apply
If you meet the eligibility criteria for the program, your next step is to apply. Here are the steps you need to take in order to move forward.
Search for eligible properties in your state. You can use the home listing tool provided by HUD to see if there are any homes listed in your area.
Check the listing price.
Have your real estate agent or broker submit a bid on your behalf. You must have a real estate or broker to participate in this program.1
When bidding on a property, make sure you offer the exact HUD list price.1 This is a requirement. If your bid is accepted, you’ll only have to pay 50% of that list price.
Pay earnest money.1 In general, you’ll pay 1% of the purchase list price, as long as the amount is between the minimum $500 and a maximum $2,000 required by HUD. If your offer is accepted, the money will be applied toward your purchase price—and it will be returned to you if your offer is rejected.
Arrange to finance the purchase. You can use FHA or U.S. Department of Veterans Affairs (VA) financing, as well as conventional financing or cash.1 If you qualify for any FHA-insured mortgage program, your down payment is only $100 and you may finance closing costs. It’s even possible to use an FHA Rehabilitation, or 203(k), loan to buy a home in the Good Neighbor Next Door program. Your lender should have ideas about what you qualify for.
Sign the paperwork, including a second mortgage on the discounted amount.1 You’ll be required to sign for a “silent second” mortgage when you get a home in this program. However, as long as you meet the occupancy requirements, you won’t have to make payments or worry about interest on it. If you leave early, though, you will have to make prorated payments on the discounted amount.
It can help to have financing lined up ahead of time, as well as to consult with a knowledgeable real estate broker about your options and which lenders offer financing for this program. With the right broker in your corner, you’re more likely to successfully navigate the process.
Pros and Cons of Participating
Before you move forward, it’s important to understand the advantages and disadvantages of being involved.