Section 203b

• Section 203b is HUD's mainstay program for mortgage insurance. The program offers several benefits for applicants who are either buying a home for the first time or unable to afford other types of mortgages. Among its many advantages is that the program requires only a 3.5 percent down payment, whereas conventional mortgages ask for 10 to 20 percent. HUD also limits other applicable fees when purchasing a home. You must use the house you buy through this program as your primary residence.
  
  

Rehab Mortgage Program

• Section 203k, or the Rehab Mortgage Program, fulfills a particular need for homebuyers. This mortgage insurance program is used to rehabilitate a home in need of minor to major repairs, even reconstruction. If you are looking to buy a home and find an otherwise ideal home that simply needs repairs, this program allows you to buy and rehabilitate that home without a large cash outlay. Many of the same rules and restrictions of Section 203b also apply to 203k, but proceed with caution, as lenders may add additional fees.
  
  

Energy Efficient Mortgage

• In 1992, Congress approved the Energy Efficient Mortgage, or EEM, Program in five states and expanded it to become a national program. The EEM is used to allow borrowers to acquire a loan for the express purpose of rehabilitating their home or the home they intend to buy with energy-efficient improvements. This loan is incorporated into the mortgage for the house. The cost of the energy-saving improvements cannot exceed the anticipated savings in utility bills during the useful life of the improvements as determined by an energy consultant or a home energy rating system.
  
  

Condominium Mortgage

• In 2008, the Housing and Economic Recovery Act allowed the Federal Housing Authority to modify the existing Section 203b to accommodate condominium buyers. Whereas applicants for Section 203b were only allowed to buy single detached homes or multifamily units, as of 2008 they were allowed to purchase a unit in a condominium building. This is defined as a building with two or more units and can be a structure with an elevator, a row house, a walk-up or a semi-detached or detached building. The process was put into action on December 7, 2009.
  
  

Considerations

• Note that HUD does not provide loans but rather insures them so that lenders are protected from a borrower's default on the mortgage. Offering this protection to lenders entices the lenders to offer loan options to home buyers who would not normally meet the lender's qualifications. Therefore, borrowers that lenders might deem too risky, such as those with credit problems, are sometimes approved. It is important to ensure that you have an accurate credit report, as you do not want to be disqualified from the program because of an error on your report.