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- The Good Neighbor Next Door program lets eligible homebuyers purchase a HUD home at a 50% discount.
- This program is only available to law enforcement officers, teachers, firefighters, and EMTs in eligible revitalization areas.
- You must remain in the home for three years — otherwise, you'll have to pay back the discounted amount.
Buying a home at a 50% discount might seem too good to be true. In fact, that's part of the reason so few people who are eligible to buy a house through the Good Neighbor Next Door (GNND) program actually do so.
"When we send out emails and flyers and notifications to the law enforcement agencies, fire departments, and school districts where these homes are located, our biggest problem is people think it's a scam," says Bruce Arrant, real estate broker and founder of Good Neighbor Next Door Realty. "'Half-priced house? That's gotta be some kind of scam.'"
It's not a scam, but there are some hurdles to participating.
What is the Good Neighbor Next Door program?
GNND is a program run by the U.S. Department of Housing and Urban Development (HUD). It allows law enforcement officers, teachers, firefighters, and emergency medical technicians (EMTs) to purchase a home at a 50% discount. If you use an FHA mortgage to purchase the property, you may also be able to put just $100 down, as opposed to the usual 3.5% down payment.
The goal of the program is to encourage homeownership in HUD-designated "revitalization areas."
Benefits of the Good Neighbor Next Door program
Though only certain borrowers can qualify for GNND, the program has many perks for those that use it. Here's a look at the Good Neighbor Next Door program benefits:
Significant discounts on homes
The discounts in the Good Neighbor Next Door program are the biggest benefits, as they afford borrowers significant savings when buying a home. They can save you both up front (on your down payment) and in the long run (on your loan amount and monthly payment).
Community revitalization
GNND helps revitalize the communities it operates in two-fold: first, by bringing new owners into previously foreclosed-on homes. Once the new owners move in, the homes are often updated, repaired, and renovated, improving the overall quality of the neighborhood.
Additionally, the program also brings public servants into these communities. This can result in safer neighborhoods and better educational opportunities for those who live there.
Support for public servants
At its heart, GNND is a public servant home discount program. It aims to support community members who support residents daily through services like teaching or providing emergency services or protection. Since public servants often have lower salaries than those in the private sector, GNND can help offset that and offer an affordable path toward homeownership.
Eligibility requirements
There are two sets of requirements for the GNND program — one for the borrower and one for the property. See below for full details on eligibility for Good Neighbor Next Door.
Who qualifies?
To purchase a half-priced home, you'll need to work full-time in one of the occupations eligible for the GNND program.
- Law enforcement officer: Must be employed by a federal, state, local, or tribal government's law enforcement agency.
- Teacher: Must be employed at a state-accredited public or private school that serves students in grades pre-kindergarten through 12.
- Firefighter or EMT: Must be employed by a federal, state, local, or tribal government's fire department or emergency medical services responder unit.
To be eligible, you have to work in the revitalization area where the home is located. Revitalization areas are very low-income areas with low homeownership rates and a high number of HUD-foreclosed properties.
There are no income or credit requirements for the program, though you will need to meet certain requirements to qualify for a mortgage to purchase the home. For FHA mortgages, this generally means you'll need a credit score of at least 580 and a debt-to-income ratio below 43%.
If you've owned a home in the past year, you aren't eligible for this program. Once you've purchased your GNND home, you'll have to stay in it for three years as your primary residence — otherwise, you'll have to repay the discounted amount.
Property requirements
Not every home on the market can be purchased at a discount through this program; only certain HUD homes are eligible. With a HUD home, the owner originally bought the property with an FHA mortgage, then went into foreclosure.
Keep in mind that when you buy a foreclosed property, you're purchasing it as is. This means that it's sold in its current condition. If there are major issues, you'll be responsible for making repairs, which can get expensive. You might want to consider getting a renovation loan such as an FHA 203(k) mortgage, which lets you roll repair costs into your mortgage.
How to apply for the Good Neighbor Next Door program
Do you qualify for GNND? Here's the Good Neighbor Next Door application process you'll need to follow:
Find an eligible property
Only HUD homes that are in revitalization areas are eligible for GNND, so inventory for this program is typically extremely limited, with only a few homes available in the US at a time. You can view all available HUD-owned properties on the HUD Home Store.
If you are able to find a home you're interested in, you'll need to act fast, since GNND homes are only made available for seven days before they're listed for the general public to bid on.
You'll work with a HUD-registered broker to submit your bid. If multiple people submit a bid for a GNND home, the buyer will be chosen via random lottery.
"We have a plethora of Good Neighbor Next Door homes that nobody submits their name into the lottery drawing on and they are simply diverted over to the general public list at full price," Arrant says. "If one person had put their name in, they would've had a 100% chance of winning the lottery."
If your bid is chosen and you move forward with the purchase, HUD will provide a "silent second" mortgage on the property that covers the discount amount. So, if a home is listed at $100,000, HUD will cover $50,000 and you'll get a mortgage for the remaining amount (minus your down payment).
HUD will release its mortgage after you've lived in the property as your primary residence for three years, which means you'll get the discounted amount back in equity. If you sell the home before the three years is up, you'll have to pay the second mortgage amount back to HUD.
Application steps
For the remaining purchase amount, you'll need a mortgage, which you can get through any mortgage lender you'd like. And though the program offers up previously FHA-backed properties, you don't have to use an FHA loan to participate.
Once you choose a lender and loan product, you will:
- Fill out the lender's application. This requires details regarding your finances, income, and employment.
- Submit documentation. We'll go more into this below.
- Have your home appraised. This is for the lender's sake — to ensure the home is worth what you're borrowing for it.
- Pay your down payment and closing costs. You'll do this on closing day, when you sign your final paperwork.
- Close on your loan. This will finalize the transaction, and you'll get your keys.
There may be additional steps, depending on which loan product and lender you use. Talk to your loan officer for specific instructions.
Required documentation
Your lender needs various documents to verify your financial information and ensure you can make your payments.
These usually include:
- Tax returns and W-2s for the last two years
- Your last two pay stubs
- Your last two months of bank statements
- Statements for any other income you earn (Social Security, child support, etc.)
- Statements for any investment accounts you have, including IRAs, 401(k)s, etc.
Again, the exact documents depend on your lender and loan program, so check with your loan officer for more details.
Good Neighbor Next Door program FAQs
The Good Neighbor Next Door program offers significant discounts on homes to law enforcement officers, teachers, firefighters, and EMTs.
To be eligible for the Good Neighbor Next Door program, you must be a law enforcement officer, teacher, firefighter, or EMT, and commit to live in the home for at least three years.
The program offers a 50% discount on the list price of homes in designated revitalization areas. Only first responders and teachers are eligible.
Finding Good Neighbor Next Door homes can be challenging. Eligible properties are listed on the HUD Home Store website, but there is usually a very limited supply of these homes in any given area. Act fast if you find one you like.
The application process for the Good Neighbor Next Door program involves finding an eligible home, submitting an offer, and providing the required documentation to verify your eligibility.
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