Every day, first responders put their lives on the line on our streets while educators shape the future leaders of our nation in the classroom.
As a thank you, they're eligible to buy a home for half-off through a little-known program called "Good Neighbor Next Door" (GNND) that's run by the U.S. Department of Housing and Urban Development (HUD).
Part of HUD’s mission is to revitalize and improve certain neighborhoods by encouraging home ownership. The GNND program achieves that goal by putting homes into the hands of public servants at an affordable price.
Here’s what you need to know about GNND…
The program allows certain public-sector employees to buy any HUD-owned single-family home in chosen revitalization areas at 50% off.
Let’s say you find a HUD home that lists for $150,000 in a revitalization area. With the GNND program, you only have to take out a mortgage for $75,000 because HUD finances the other half itself. More on that process in a bit…
Furthermore, if you qualify for an FHA-insured mortgage program, then you only have to put a $100 downpayment on the home! Closing costs can be financed into your mortgage.
Law enforcement officers, pre-K through 12th grade teachers and firefighters/emergency medical technicians (EMTs) are among those who would qualify for this program.
Further details about what constitutes an eligible participant can be found here.
Revitalization areas in participating cities must meet certain criteria, involving average household income, rate of homeownership and foreclosure activity.
You can read more about revitalization areas here.
You’re probably scratching your head because it seems so amazing, but here’s the deal: In order to help get you into a home through this program, HUD finances the other 50% that you’re not paying on its own!
So the government basically takes out what it calls a "silent second" mortgage, according to the FAQs on HUD.gov. You pay no interest or principal on this "silent second" mortgage provided you live in the home for the required occupancy period.
Hopefully, you’ll find a home that you want to stay in for many years to come as you help turn the tide in an up-and-coming neighborhood.
But according to the letter of the law, the GNND program requires that you stay in that home as your primary residence for a full three years.
The home must be located in the same community in which you work to qualify for GNND. If the home needs repairs, there's a separate federal program for 203(k) rehab loans that allow you to roll the cost of repairs into your mortgage.
If you can’t live in the home for at least 36 months, you’ll be penalized and required to repay HUD the original 50% discount you got on a prorated basis.
So, let’s return to the example of the $150,000 house that you get for $75,000 through GNND. If you only occupy that home for 12 of the required 36 months, you’d be responsible for paying HUD two-thirds of the original 50% discount, which works out to be $50,000.
A full 100% of the profit is yours to keep so long as it was your primary residence for 36 months. You can also treat the home as an investment property after three years and rent it out. You’ll get to keep all the money as the landlord.
You will need to work with a real estate agent or broker to take advantage of this program. You can find a HUD-registered broker here.
Once you have a broker or agent, start looking online for homes with this search tool.
You’ll see any number of listings like this one:
The list price on this particular example is $115,000. But remember, the GNND program would allow you to purchase this home for half of that — $57,500, in this case.
You’ll also notice a “Bid Open Date” on the listing. All homes in the GNND program go up for bid for a period of seven days. When multiple bids come in on a property, the winner is selected by random lottery because all bids are the same ($57,500).
When you put a bid in, you also have to put down earnest money that shows you’re a serious bidder. The earnest money that’s required is 1% of the list price, although it can be no less than $500 and no greater than $2,000.
Finally, we should note that you can’t currently own a home when you submit a bid, and you’re further barred for bidding if you owned another home at any time within the past 12 months.
See HUD's FAQs about this program for further details.
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