When a person stops paying their FHA-guaranteed mortgage, the FHA may start the foreclosure process, which means that since the buyer can no longer make payments, the FHA will sell the home to pay off the mortgage of the defaulting buyer.Individuals can sometimes purchase FHA foreclosures, for little to no-money down., The FHA as part of HUD provides a website where homeowners can search for HUD properties for sale. You can search for these properties here: http://hudhomestore.com/HudHome/Index.aspx.


Non-government websites also allow you to search for FHA foreclosures. You can locate these websites by conducting an internet search for “FHA foreclosure properties.”
If possible, you will want to determine the reason for the foreclosure. The fact that the home was foreclosed upon may mean there is something structurally wrong with the house that you will need to get fixed as soon as possible. It may also mean the home was owned by someone who got locked into a high-interest loan they could not afford and ended up defaulting. It will be your burden to determine this.
 Depending on the reason for foreclosure, these homes may be what you might call “fixer-uppers” or simply be move-in ready homes that someone could no longer afford. Before purchasing a foreclosed home, you should understand the terminology of foreclosure so that you better understand what type of property you may be purchasing.


Insured (IN) homes are homes that have been foreclosed upon, but meet the Minimum Property Standards (MPS). This means that they have been evaluated by a home inspector, who has “passed” the home.
Insured with Escrow (IE) homes require some measure of repair to meet the MPS. This means that the home may have some pressing structural, heating, or plumbing deficiencies that will need taken care of in the short term. The problems are not such that the house is uninhabitable, but significant enough to affect the value of the home.
Uninsured (UI) homes do not meet MPS. This means that the home requires structural, heating, or plumbing repair before it can be inhabited.
People who undertake the project of a foreclosed home are may be DIY-types who enjoy the challenging of fixing up a property acquired on the cheap. If you are not excited about the idea of gutting a house and installing a new septic system (or paying to have this done), this might not be the option for you.
 Before purchasing the home, you need to fully understand the condition of the home and the amount of work and money you will need to invest so that the home is livable. You should hire a home inspector who can evaluate the home, determine any significant structural problems and establish how much it will cost to repair.


While homes that need substantial work are technically not available for “no money down” mortgages, if the home meets a certain threshold for repairs, you may be able to qualify for an FHA rehabilitation loan.



If you have discovered significant structural problems, decide how you're going to fix the home up and how much it will cost.
If you plan to do the work yourself, determine how much the materials cost and how much you can reasonably expect for your labor.
If you plan to hire someone to perform the work, determine how much will it cost and how long it will take.
 This FHA program allows home buyers to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home.


Contact an FHA-approved lender and discuss the application process. You can locate lenders at: http://www.hud.gov/ll/code/llslcrit.cfm

You should keep in mind that purchasing a foreclosed property that needs a lot of work may not be the best option, particularly if the sum for the repairs exceeds the purchase price of the home, essentially resulting in a “zero money down” payment after the fact.
Understand the FHA foreclosure process.
Research foreclosure homes available in your state.
Decide how much work you want to put into your house.
Have the home inspected.
Calculate the cost of the necessary repairs.
Apply for an FHA 203k home repair mortgage after inspection.
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