Looking to get a big leg up in your post-military career? The Department of Housing and Urban Development offers a little-known program that may help some of you buy and own a house at 50 percent off, if you enter certain careers when you start your civilian life.
The Good Neighbor Next Door Sales Program
The Good Neighbor Next Door Sales Program (GNND) was designed to get good people into struggling neighborhoods. The program provides a subsidy to any qualifying law enforcement officer, teacher, firefighter or emergency medical technician who wants to purchase a one-unit, single-family home in a specially-designated “enterprise zone.”
For law enforcement officers, you can qualify if you are a full-time officer of a state, local or federal agency sworn to uphold the law and empowered to make arrests.
For teachers, you can participate if you are a full-time teacher at a state-accredited public or private school teaching grades Pre-K through grade 12. However, the school must serve students from the area in which you are buying your home.
If you fall into one of the categories above, you can get a 50 percent discount on the appraised value of the home. You must, however, commit to living in the home for at least 36 months.
If you qualify for any FHA-insured mortgage program, all you need is a $100 down payment. That’s a far sight less than the 3.5 percent down payment usually required on FHA loans, though, admittedly, the loan-to-value on the program is only 50 percent, so it’s not like they’re taking a huge risk.
However, you do need to make an ‘earnest money’ deposit of 1 percent of the purchase price, not less than $500 and not more than $2,000. If your offer is accepted, this money is credited to you at closing (so in reality, you need to have a bit more than $100 in cash to close on a home under this program).
If your offer is rejected, your earnest money deposit is returned. However, if your offer is accepted, but fail to close the sale on your end, you forfeit your earnest money.
You can also use a VA loan with the GNND program, if you like, or a conventional mortgage, or just buy the home for cash.
How it works
If you buy a home worth, say, $100,000, you will actually sign two notes for $50,000 each. One you pay off. The other one you make no payments on as long as you live in the home. After 36 months, you have no further obligation on the 2nd mortgage.
What homes are eligible?
Eligible homes are any single-unit family residential home located in a Revitalization Area designated by the Secretary of Housing and Urban Development. This includes stand-alone houses, condos and townhomes. It doesn’t include a duplex or quad designed for you to live in one and rent out the other units, though.
Any other criteria?
Yes. You cannot own another piece of property during the 36-month residency period. You cannot have owned a home for a one year period prior to your move-in date.
There’s no price haggling. You must offer the HUD list price to qualify for the 50 percent discount offer under the Good Neighbor Next-Door program.
Do you have to stay on the job?
No. Once you close on the loan, there’s no requirement on HUD’s part for you to remain in the profession that made you eligible. You just have to keep living in the home for 36 months.
If you move out, you’ll have to repay a pro-rated amount. 1/36th of the second mortgage – the one on which you make no payments – is forgiven for every month you live in the home.