Types of HUD Properties: IN, IE, and UI

Before homes are listed for bidding, HUD orders an appraisal and an inspection on a house (according to FHA appraisal guidelines).  Each home generally falls into three categories: 1) an insurable property (IN), 2) an insurable with repair escrow property (IE), and 3) an uninsurable property (UI).

An insurable property is a home that meets the insurance requirements for an FHA 203(b) mortgage.  An FHA 203(b) mortgage is FHA typical 30 year fixed-rate mortgage that most first-time homebuyers use to finance a home.  Generally, no repairs are necessary for HUD to insure an FHA loan for the buyer.  Offers from buyers with other-than-FHA financing such as VA loans, conventional mortgages or cash buyers are also acceptable for this type of property.

An insurable property with a repair escrow refers to a home that is also eligible for a 203(b) mortgage with a repair escrow.  It is important to note that the buyer must accept the repair escrow and should add the amount of the repairs to the offer price IF he or she is financing the purchase with an FHA 203(b) loan.  

The repair escrow is an account established upon the closing of the purchase of the home for the amount of the repairs on the property.  It is the lender’s responsibility to inspect and distribute the monies as necessary within 30 days of the close of escrow.  These costs and repairs are included in the buyer’s loan amount and become part of the monthly house payment.  Offers from buyers with other-than-FHA financing such as VA loans, conventional mortgages or cash buyers are also acceptable for this type of property.  

A property may be classified as insurable with conditions.  These homes may fall under the IN or IE categories and have conditions that must be met prior to closing.  Typically the conditions involve having a systems check, roof inspection or other property condition inspection as required by the appraiser.  The inspection fees are the buyer's cost.

An uninsurable property are homes generally needing extensive repairs and deemed by HUD as not eligible for FHA insurance in their as-is condition.  Other-than-FHA financing is required.  However, HUD will permit the purchase of certain properties with FHA 203(k) financing (rehab mortgage where a lender may finance the repairs of the home into the mortgage). 

All HUD homes are sold on an “as-is” basis.  In other words, what you see is what you get.  HUD will not make any repairs or warranties on the properties.  Furthermore, HUD will not guarantee the condition of any house.