The Officer Next Door Loan Program

The Officer Next Door program that was established by the Department of Housing and Urban Development (HUD) is designed to offer single-family houses, townhouses and condominiums for sale to officers at a 50 percent discount. The goal is to encourage Officers to buy homes in low and moderate-income neighborhoods.

These neighborhoods, referred to as revitalization areas, are specifically designated neighborhoods that are receiving targeted public and private sector assistance in order to promote local economic growth.

As a result, HUD is offering a 50% discount on qualifying homes. Since the supply of qualifying homes is severely limited, homes are sold through a lottery system. In addition, Officers purchasing qualifying homes with FHA-insured mortgages will only need $100 for a down payment (versus the traditional 3% required on other types of property).

The Officer Next Door program is open to any sworn law enforcement officer that works for the city, county state or Federal law enforcement agency that has the power to arrest (i.e. the general power of arrest, not limited power of arrest). This includes college or university police with the general power of arrest. Correctional officers, on the other hand, generally are not eligible unless they have the general power to arrest outside of the correctional facility. In addition, other criminal justice employees such as probation or parole officers, court services officers, etc. are not generally eligible.

An officer must live in the home for a minimum of three years as his or her primary residence. An officer is not required to stay with the law enforcement agency during the three year residency requirement. A buyer cannot own any other real estate at the time of closing. In addition, the sales price of qualifying homes is not negotiable. An applicant must always pay HUD’s asking price.

Upon successfully winning the bid, HUD does not automatically discount the property by 50%. Instead of automatically giving the new home owner instant equity, HUD places a “silent second” against the home for the discounted amount. No interest or payments are assessed on the second lien if the home owner lives in the home for the required three years. All profits earned after the three year period are the home owners.

Depending upon the circumstances, failure to fulfill the three year residency requirement may have serious consequences. HUD may restrict the home owner from selling the property for no more than 110% of the original sales price. In addition, HUD may require all or part of the discounted amount to be repaid. Generally the pro-rated repayment amount goes as follows: repayment of 90% of the discounted amount during the first year, repayment of 60% of the discounted amount during the second year, and repayment of 30% of the discounted amount during the third year. Should fraud or other serious charges suspected, HUD may file criminal charges against the Officer, ban the Officer from further participation from any HUD, FHA, and other Federal programs, and may face the possibility of serious fines and potential prison time. HUD will conduct “spot checks” during the first three years to insure that the residency requirement is being fulfilled.