If the home you are interested in buying is a HUD (Housing and Urban Development) foreclosure home, then the home was last purchased as an FHA (Federal Housing Administration) mortgage. The federal government insured the home loan, making the previous FHA loan possible. By insuring the loan, the federal government agrees to repay the mortgage lender for all money lost by the lender in case the home is foreclosed on. This is a good deal for the mortgage lender as their investment in the home is 100% insured. The Federal government protects

itself by collecting a Mortgage Insurance Premium (MIP) on each transaction of a federally financed property at the time the home is purchased. The MIP is 2.25% of the mortgage amount and is helpful in several ways.

Because the MIP is charged, the FHA can allow a homebuyer to reduce their initial out-of-pocket cash expenditure from 5% to 3% of the purchase price of the home, thereby making it possible for many more Americans to purchase homes. HUD reports in their mission statement that homeownership is the goal of the majority of Americans. This goal of homeownership has been the driving force behind HUD and their decisions and directives since HUD’s inception.

Most importantly to you, the MIP paid by all the former homeowners allows HUD to sell the foreclosure homes in their home inventory at a substantial discount. These HUD foreclosure homes can be found on NewJerseyHud.com.

Each foreclosure home has its own financing options. For the best information on a purchase strategy for the particular foreclosure home that you’re interested in, contact a real estate agent in your area familiar with HUD homes.