Magan Landsiedel and Jeff Smolinski just bought a $133,000 home in Largo. Their down payment: $100.
A typical government-insured mortgage would have required $4,700 down; a conventional lender might have demanded more than $26,000.
But Landsiedel and Smolinski took advantage of a little-known U.S. Department of Housing and Urban Development program that lets people buy government-owned foreclosed homes for just $100 down.
Uncle Sam is looking for buyers for 3,451 homes like this in Florida.
Landsiedel, a nurse, and Smolinski, a soon-to-be Tampa police officer, both 27, searched foreclosed homes for a year until recently finding the three-bedroom, two-bathroom house built in 1979.
The house needs new carpet, paint and closet doors and several small holes need to be patched.
"It's going to be a beautiful home," Landsiedel said. "We got a great find in this one. It just needs some TLC."
The 1,626-square-foot home last sold in 2008 for $237,000. HUD wanted $135,000 but accepted the couple's offer of $133,000.
"We think it's a great deal," Landsiedel said. "We can afford to make the repairs."
Most HUD homes, including 642 in Tampa Bay, need repairs and are typically priced at the lower end of the market.
But the homes could be a bargain for a first-time buyer with minimal cash or for someone skilled at home repairs.
If buyers don't have money for repairs, they can roll the costs into the Federal Housing Administration's 203k Rehabilitation Home Mortgage Insurance. The agency insures the loan, including the additional money for renovations and repairs. The government backing encourages lenders to green-light the loan.
HUD owns nearly 69,000 homes in the United States as a result of buyers defaulting on FHA-insured mortgages. Banks foreclosed on the properties and then cashed in on the insurance, giving ownership to the federal government.
Landsiedel and Smolinski learned about the HUD program after finding the home at hudhomestore.com. They expect to put more than $100 down and will use FHA financing.
Each HUD home listing includes an inspection report and summary of the needed repairs. The agency pays a portion of the closing costs and encourages buyers to get an independent inspection.
The $100 incentive can only be used by owner-occupants, not investors. The low down payment is an enticement to promote home ownership and neighborhood revitalization.
The buying process is online. Buyers need to go through real estate agents. Any agent can submit an electronic bid during the first 30 days the house is listed. If properties don't sell in 30 days, investors can buy them.
The HUD inventory will rise as thousands of FHA-insured homes exit foreclosure in the next 18 months, experts said. HUD sold 118 homes in Tampa Bay in 2006, a number that jumped to 483 last year. So far, 77 have sold this year.
Although lenders fueled part of the foreclosure crisis by issuing mortgages to unqualified buyers, HUD doesn't believe it's risky to let people buy homes with tiny down payments, said Ralph Jackson a HUD real estate director in Atlanta.
He pointed out that FHA has stricter underwriting standards than those used by many lenders during the boom. Jackson said buyers with minimal down payments have an immediate stake in the homes because they need to spend money on repairs.
"They're more likely to keep that property," he said. "Income and credit are still required. This does not pose a great risk to us."
The agency, he added, also wants to sell the homes to recoup millions paid on the insurance claims.
The government is offering incentives to brokers who sell the houses.
This month, HUD starting offering bonuses of $500 to $1,000, on top of regular commissions, if listing brokers find buyers in fewer than 30 days.
Scott Samuels of Remax Metro in St. Petersburg deals with bank-owned properties and listed the Largo home. The HUD program, he said, can provide home ownership for people who can't qualify for conventional mortgages.
"It's a good program," Samuels said. "A lot of people don't know about it."
Catherine Delorenzo, an agent with Realty Executives Adamo & Associates in Seminole, represented Landsiedel and Smolinski in their purchase. She had never been involved in buying a HUD home in her seven years as a Realtor.
So far, she described the HUD process as "very simple" and easier than closing a deal on a short sale.
"I would not hesitate to do it again," Delorenzo said. "It's good that buyers have these options. It shouldn't scare agents away from showing the homes to customers."
Mark Puente can be reached at email@example.com or (727) 893-8459. Follow him at Twitter at twitter.com/markapuente.