Determine if the home you would like to purchase is eligible for a grant under the Neighborhood Stabilization Program in your state. You will need to spend at least 25% of the total grant to purchase a foreclosed home (also known as Real Estate Owned or REO). Exact participant requirements differ depending on local and state regulations. Contact your state department of housing for more information about participation in the program. Not every community has access to the NSP. Only neighborhoods that have been judged by HUD to be significantly affected by foreclosures, abandonments and blight are eligible to participate in the program.
Find out if you can realistically afford to purchase a home with the assistance of a grant from the NSP. Review price listings of REO properties in the community in which you are applying for an NSP grant. No community evaluates grant applicants based on income or credit score, but if you are awarded the grant, you'll be obligated to spend at least 25% of the grant on a down payment on the home with the rest of it going to renovation and other home-related costs. Many NSP grants are made in excess of $100,000. HUD does not publicly explain how it evaluates grant requests, but make sure you have sufficient funds and a strong enough credit score to qualify for an affordable mortgage or are capable of covering the rest of the home purchase in cash.
Apply for a grant through your local Neighborhood Stabilization Program. In most areas, the grants are time-limited for up to a few years. The grants often have further requirements. For example, if the home is to be redeveloped into a rental, the new owner may be required to adhere to the HUD Affirmative Fair Housing Marketing Plan, which places guidelines and limitations on how the apartments are marketed and priced. The number of grants available are limited. The exact requirements for grants differ depending on the community, but all mandate that you fill out a W9 form containing your social security number, home address and other relevant contact information. All communities also require that you complete the HUD Request for Release of Funds and Certification form when applying for the grant which asks detailed questions about your intentions for purchasing, renovating and managing the property you're applying for a grant to purchase.
Use 25% or more of your grant money for a down payment on a foreclosed property. You may also be eligible for Federal Housing Administration (FHA) subsidized mortgages to finance the home purchase. FHA mortgages place many additional requirements on homeowners and it can take months to gain approval.
Comply with all regulations regarding the use of your Neighborhood Stabilization Program grant. The grants can also be used to demolish foreclosed properties and redevelop them afterward. You may be subject to penalties, fees and even criminal fraud charges if you misrepresent your intentions for spending the grant money.