The Department of Housing and Urban Development offers the 50% off Good Neighbor Next Door Program for full-time teachers, police officers, firefighters, and EMTs employed with the fire department.
The listing period for this lottery program is seven days. During this time, a HUD-registered real estate broker must be utilized to enter qualified GNND buyers. The business day following the lottery deadline, HUD will choose a winner and two back-ups at random. The winner will have the option of signing a contract with HUD for no more or less than 50% off the home's current valuation. In addition to signing the contract, the winner must submit an earnest deposit to HUD. The amount of the earnest money deposit required is an amount equal to one percent of the list (pre-discounted) price, but no less than $500 and no more than $2,000. This amount will be credited back to the buyer at closing.
Participants must be employed in the area and their employer must provide service to the available home. For Pre-K-12 teachers, the employer is considered the school district and not the neighborhood school. Pre-K-12 teachers at accredited private schools also qualify for this program.
Individuals in these occupations qualify for this program if they have not had ownership in a residential property in the previous 12 months and have never purchased a GNND property. Financially, they must be able to provide proof of funds or a prequalification letter from a mortgage company.
Lastly, they must agree to own and occupy the home for three years after closing. During this time, HUD will hold a silent second mortgage for the discounted amount. GNND participants aren't required to qualify financially for this second mortgage and there is no monthly payment or interest associated with it. At the end of the 36-month period, the second mortgage will be automatically released. If the GNND participant sells the property before the 36-month period, HUD will require a prorated discount payback based on the number of months the participant owned the home.
If the GNND participant chooses to finance with FHA, the down payment can be $100 and all allowable closing costs can be added to the first mortgage. Qualified participants must utilize a HUD-registered real estate broker to enter the lottery, assist with the process of closing, and provide access to the property. The GNND participant is required to pay a buyer premium or commission to real estate broker. The GNND program allows participants to add the broker fee to their FHA mortgage.
These homes are sold "as-is." They will vary in condition and are subject to buyer's inspection. After the lottery-awarded buyer signs an accepted contract, he/she will receive a 15-day inspection period and given the option to move forward or cancel the contract based on the inspection results. If, in the 15-day period, the participant chooses to cancel the contract due to an issue discovered in the inspection, HUD will return the earnest deposit.
HUD chooses these homes based on the location and not the condition. Homes qualify if they are in HUD-designated revitalization areas. These are areas with a higher-than-average FHA foreclosure rate and a higher-than-average renter to owner ratio.
If GNND homes need a renovation, FHA offers a renovation mortgage called the FHA 203K. It will allow the borrower to finance the renovation costs into their mortgage, leaving just one monthly payment.