Frequently Asked Questions about the Good Neighbor Next Door Program.

1) Who are you guys?
Rob Sipes and Robert Kaetzel of Real Estate Professionals, Inc. We are real estate licensees in the State of Maryland and sell the majority of the homes available under the program here. We have helped over 100 people purchase a home at a 50% discount. We are affectionately known by our clients as "The Robs". We are also the preferred real estate agents in Maryland who work in conjunction with Bruce Arrant, Good Neighbor Next Door Realty, Inc, www.gnnd.com and www.goodneighbornextdoor.com. We are the experts who can help you be successful with the Good Neighbor Next Door Program (GNND Program).

2) What is HUD?
HUD is the Department of Housing and Urban Development, an agency of the federal government.

3) How are you involved?
HUD says that if you want to purchase a Good Neighbor Next Door home you must utilize the services of a HUD registered licensed real estate broker. That's us!

4) Can I deal with any real estate agent that I want?
Yes you can, however the agent's brokerage must be HUD registered. Not every real estate brokerage is. It's a good idea to deal with someone who has experience with the program as it can be a quite complicated and bureaucratic. Most real estate agents have never participated in a Good Neighbor Next Door sale. If they are unfamiliar with the program and the process of navigating a Good Neighbor Next Door sale, they can screw things up for you pretty badly.

5) How does a house become a HUD Home and qualify for the Good Neighbor Next Door (GNND) program?
The Federal Housing Administration (FHA), which is a part of the Department of Housing and Urban Development (HUD), provides federal mortgage insurance to Mortgage Lenders. This guarantees that Mortgage Lenders will be reimbursed in the event home buyers default on their mortgage. When a Mortgage Lender is forced to foreclose on an FHA-insured single family home, townhouse, duplex, triplex, fourplex or condominium because the owner can no longer make payments, the Mortgage Lender can file an claim with FHA for the balance due on the mortgage and convey title of the property to HUD. If that home is in a geographically coded area declared as a Revitalization Zone, then it may be placed for sale under the GNND program. GNND homes are offered to participants BEFORE the General Public has an opportunity to buy them.

6) Are all HUD homes eligible for the GNND program?
No. Only a select few properties that are HUD acquired are available for the GNND program. Do not wait for the perfect house or perfect location. If a home is listed that you can qualify to purchase and it meets you minimum housing needs, then always try to take advantage of the opportunity. It is only a three year commitment and then you can sell the home, keep it as a rental, or live in it as long as you want. Most GNND participants live in their homes well beyond the three year residency requirement.

7) Where do I obtain financing for the home?
You can use any Mortgage Lender of your choice and any type of financing. However, to take advantage of the $100.00 down payment program, you must use FHA 203B or 203K financing. Please keep in mind that it is difficult or impossible to combine other assistance programs with the GNND program. It is also not usually possible to use a Veterans Administration (VA) loan on most properties.

8) What happens if no one enters the lottery drawing?
If no one enters the Lottery for a home during the exclusive 7 day GNND listing period the home will be marketed to the general public at full price. The property will not be available for purchase under the Good Neighbor Next Door Program again.

9) What does IN, IE, and UI mean?
HUD homes are listed three ways "IN" Insurable, "IE" Insured with Escrow, and "UI" Uninsurable. This has nothing to do with home owner's insurance coverage, and everything to do with whether the property qualifies or meets minimum property standards (MPS) for an FHA type loan. In order to obtain an FHA Insured Loan, FHA requires that a home meet certain requirements and standards. "IN" Insurable means the property in its present condition appears to meet all minimum property standards to qualify for an FHA loan without any repairs. "IE" Insured with Escrow means that there are some deficiencies that do not meet the minimum property standards, but the home does qualify for an FHA 203B with Repair Escrow loan. These deficiencies or minimum property standards violations are things like a broken hot water heater, minor roof repairs, peeling paint, missing flooring or damaged drywall etc... It has been estimated by the appraiser of the property that all the repairs would cost $10,000 or less to meet minimum property standards. The Repair Escrow amount is not paid by HUD and is added to the Buyers total loan amount. The Buyer has 30 days to make the repairs and then after an inspection; your Lender releases the repair escrow money to you. "UI" Uninsurable means that it has been estimated that repairs needed to bring the property back up to minimum property standards would cost more than $10,000. This property does not qualify for FHA 203B financing, but as with most HUD properties it does qualify for FHA 203(K) financing or 203(K) streamline financing. FHA 203K Financing is a property acquisition loan and home improvement/repair loan all rolled into one. Some HUD homes cannot qualify for any type of FHA financing but they are very rare. These properties can only be purchased with conventional financing methods or cash.

This part can get confusing and we are available to walk you through the financing process to help you arrange the financing that is best for you.

10) Should I get Prequalified for a mortgage?
Yes! Get started on the mortgage loan process through an FHA Lender who has experience with the 203K and 203B loan products as soon as possible. You must be pre-qualified by a mortgage lender unless you are paying cash. You are welcome to call your credit union or your own lender to arrange for financing but in our experience this is a very bad idea. Most credit unions don't do these types of loans. Most lenders have never heard of the program and will likely screw it up. If you would like to be pre-qualified for a Good Neighbor Next Door Purchase, you can fill out our pre-qualification request form. Once we receive your information, it only takes a day or two for one of the lenders that we work with to get a copy of your credit report and to call you. There is no cost or obligation to be pre-qualified.

11) When does the Lottery drawing take place and when will I find out if I won?
The lottery drawing takes place eight days after the house is listed, unless it falls on a weekend or Federal holiday. All lottery entries must be received before midnight (CST) the seventh day. All Winners are notified the following day of the lottery. If the initial winner does not close, then the option to buy the house goes to the backup entrant. Backup winners may be notified weeks or even months after the lottery drawing has taken place.

12) Should I look at every home that becomes available before I enter the lottery?
Yes! Remember these homes are FORECLOSURES and are often neglected for several months prior to HUD taking ownership. HUD sells property "as is" and does not fix them up for curb appeal. Make sure the AREA is right for you and the repair escrow or 203K loan will take care of the house fix up expenses.

13) What if I win a home and then change my mind about purchasing it?
If you decide not to purchase the home after your contract has been accepted by HUD, then you will lose your earnest money. HOWEVER, should the Buyer become unable to get financing, illness, job loss, or death of immediate family member, or for other good cause, then the earnest money will be refunded to the Buyer. Any money spent on inspections, surveys, structural engineer reports or utility connections will not be refunded.

14) What is the maximum amount that can be financed for repairs on the FHA 203K loan?
You can borrow up to 110% of the total appraised value for acquisition of the home, repairs, remodeling, upgrades, and appliances with the regular 203(k). And up to $35,000 on the streamline 203(k).

15) Who makes repairs and improvements to the homes?
On the FHA 203(B) with Repair Escrow, the Buyer hires a licensed Contractor to make the needed minimum property standard minimum property standards repairs ($10,000 or under). Prior to closing the Contractor must submit a bid to the mortgage company which declares the amount estimated for repairs is sufficient to cover the actual cost of the work. The money held in the repair escrow account will not be paid to the contractor or reimbursed to the Buyer until after the repairs are completed and inspected. On an FHA 203(K) or 203(K) Streamline, only FHA approved licensed contractors can make repairs and do improvements to your home, but check with your mortgage lender for additional contractor requirements such as references and/or credit checks, etc.

16) What are my chances of getting a home?
The chances of winning are directly proportional to the number of entries. Many homes have been awarded to participants because they were the only lottery entry. If one Teacher, one Firefighter and one Officer were all in the lottery drawing for the same home, everyone has an equal chance and 33% chance of winning.

17) How long does it take to close on a home?
Homes with an "IN" or "IE" designation usually close in 45-60 days after the drawing. Homes designated "UI" usually close 60 to 75 days after the drawing.

18) If I am moving to another state when can I start entering the Lottery for homes in my new state?
You can start entering the Lottery in other states as soon as your employment can be verified and you are considered a FULL TIME employee in your new state.

19) What if my spouse or I own a home?
Current homeowners can no longer participate and you cannot have owned any residential real property for 365 days prior to lottery submission. Also, you are considered a current home owner if your spouse owns a home or has owned a home within the last 12 months. Vacant land, vacant lots, timeshares and any mobile homes or travel trailers that are taxed as personal property are not considered residential real property in most cases.

20) Am I restricted to bidding on properties in any particular area?
Currently Law enforcement officers may purchase any eligible GNND home within a reasonable commuting distance from the officer's employment. A 90 minute commute has been deemed reasonable in the past.

Teachers and Firefighter/EMT purchasers are restricted to homes that are located in the areas served by their employer. Examples: A Prince George's County teacher can only purchase a GNND home located in PG County. A Baltimore County firefighter can only purchase a GNND home that is located in Baltimore County. A Baltimore City teacher can only purchase a GNND home that is located in Baltimore City. Private school teachers

21) How much earnest money do I have to put down?
After the property has been awarded to the Buyer, earnest money must be submitted with the contract for purchase and all GNND addendums. The program requires 1% of the listed price to be presented at time of contract submission in the form of certified funds (cashier's check or money order) payable to the buyer's title company. The minimum amount of earnest money is $500.00 if the listed price is below $50,000.00 and the maximum is $2,000.00 for homes appraised over $200,000.

22) How does the $100 down payment work? What about Closing Costs?
If you choose to take advantage of the FHA $100 down payment, then all normal closing costs, repairs, improvements, broker commissions and fees associated with the acquisition of the property are added to your total loan amount and are part of your mortgage. You can choose to pay these expenses out of pocket if you like but most people don't.

23) There are several homes I want. Can I enter the Lottery on more than one property?
Yes! HUD does not allow you to choose homes if you are the winner of more than one house. You will be awarded the first property won and any subsequent wins will be passed on to the next entrant. The order in which Lotteries are conducted is random.

24) What continuing obligations apply to me if I purchase a GNND home?
Continue to own, and live in as your sole residence, the home you purchased through the Good Neighbor Next Door Program. Certify initially and once annually that this is true for three years. The residency requirement is extended to 42 months if you utilize renovation financing.

25) May I purchase a multi-unit property if I plan to live in one of the units as my sole residence?
No. Only single-unit properties are eligible for the Good Next Door Program.

26) What happens if I get called to active military duty and get deployed?
Participants called up to active military duty and are deployed are provided clemency in regards to the owner occupancy requirements of the program for the time frame that they are deployed. Participants on deployed military duty are not required to occupy the property and are allowed to rent the property (only while deployed) if necessary to minimize potential vandalism risk. Written permission must be obtained from HUD prior to renting your GNND home if you find yourseld in this situation.

27) Can I sell the Good Neighbor Next Door Home and keep the profit?
YES! After you live in the GNND home for the entire occupancy term, you can sell the home and keep all the equity and appreciation. Most occupancy terms are just three years. Homes sold FHA 203B with repair escrow are 3 years and 30 days. Homes acquired through FHA 203K financing are 3 years 6 months occupancy term. Some of our past clients have profited over $100,000.00 (tax free) after purchasing the property and living it for the occupancy term.

28) Can I bargain with HUD on the price of a property?
No. The Lottery winner gets a 50 percent discount off of the listed price. You can't offer less than or more than the listed price of the home. All Good Neighbor Next Door homes are listed at the as-is appraised value of the property. Appraisals are obtained prior to putting the property on the market by HUD's management and marketing contractor.

29) How long do I have to live in the GNND home?
You must live in your GNND home as your primary residence for at least 3 years after closing. This time is extended 30 days for an Insurable with Escrow property and 180 days for UI property purchased with FHA 203K financing.

30) What happens if I fail to honor the 3-year residency requirement?
HUD can demand re-payment of the discounted amount on a prorated basis. That means you would have to re-pay to HUD based on a percentage of the 36 months (3 years) you owned and lived in the home. If you received a $60,000 discount on a $120,000 home and sold the home after 18 months (One and half years), then HUD will take $30,000 (half the discount) from the proceeds of the sale. At the end of the occupancy term there are no restrictions or penalties on the sale of the property. Occupancy term is extended six months for a home purchased with an FHA 203K rehab loan.

31) I have a foreclosure on my credit. Can I still participate in the program?
Yes, but FHA financing will not be available until three years after the foreclosure. If you have the funds available, then you can pay cash and not finance anything.

32) During the 3 year occupancy term can I rent out my GNND home and live somewhere else?
No. Only if you are called up for active military duty and deployed, then you may rent out or lease your GNND home after written approval from HUD.

33) Why is my Social Security number required to enter the lottery drawing?
This is HUD's requirement and it is the only way to make sure every participant enters the lottery only one time on any given home and that they have NOT previously purchased a GNND home. We use a secure page and form to make sure that your personal information is secure.

34) What if the winner cannot close on the home they won?
If a lottery winner cannot close on the home, then a Backup participant will be notified they have the option to purchase the home. A primary Winner and two Backups are selected for each lottery drawing if there are at least three participants. Backup winners could be notified of selection in as little as 3 days or up to 3 months after the drawing.

35) How can I get more questions answered?
Call or email us any time. You can reach our office 24 hours a day by calling 410-697-4600. You can also contact us through our web form located at the bottom of the main page.