Using a VA loan on a HUD home: what works, what the appraiser will flag, and the $100 down myth

Veterans and active-duty buyers ask us every week whether a VA loan works on a HUD home. Yes. It works on more of them than people think, with two catches that are about the house, not the loan.

Which HUD homes take a VA loan

• IN and IE homes: almost always. If FHA will insure it, VA will usually lend on it, subject to VA’s own appraisal.
• UI homes: sometimes. UI means the house failed an FHA inspection for a reason like a bad roof, no heat source or peeling paint. VA’s minimum property requirements (MPRs) are similar, so a UI home typically needs the same repairs before VA will close. VA does not have a widely used renovation product like the 203(k), so most UI homes end up with FHA 203(k), conventional renovation or cash buyers.

The VA appraisal is separate

FHA buyers use the appraisal HUD already ordered. VA buyers do not. Your lender orders a VA appraisal through VA’s system, which means a utility activation window is required so the appraiser can test the systems. How activation works. Budget 10 to 14 days for the appraisal on a 45-day clock.

What HUD pays

You can ask HUD to pay up to 3% of the price toward closing costs on your bid, the same as any buyer. VA also limits what a veteran can pay in certain fees; HUD’s closing agent is used to this. The VA funding fee can be financed as usual, or waived if you have a service-connected disability rating.

The $100 down myth

The $100 down incentive is an FHA-only program. VA buyers do not use it, and do not need it: VA is zero down on the full price. What VA buyers do use is the owner-occupant exclusive period and the Good Neighbor Next Door discount if they are also teachers, officers, firefighters or EMTs. GNND details.

Colorado-specific notes

• VA requires a termite inspection only where the VA regional office says so; Colorado does not require one.
• Well and septic homes need a water test and a septic inspection for VA. Plan for both on rural HUD listings.
• The CHFA and metroDPA programs allow VA first mortgages if you want a down payment or closing cost grant on top of zero down. Programs that stack with VA.

A plain-English example

A retired Army sergeant bid on an IE home in Fountain listed at $312,000, as an owner-occupant with VA. The VA appraisal came in at $318,000 and flagged a missing handrail, which the lender allowed him to fix himself before closing. HUD paid $9,360 toward his closing costs. He brought $0 down and about $1,400 to the table for prepaids. He closed on day 41.

Not sure which rule applies to the house you are looking at? Call or text 303-955-4220. A live person answers, and the answer is free.

Written and reviewed by

Brian Lee Burke, Colorado HUD home specialist and team leader

Licensed Colorado real estate professional since 2002 · REALTOR® · Team leader and licensed broker of the Kenna Real Estate Group at Keller Williams DTC, a HUD-registered group that regularly bids on HUD homes · Author of The Real Estate Playbook and Mastering Real Estate. Brian’s full HUD biography.

Last reviewed: September 13, 2026 · Sources: HUD Home Store (hudhomestore.gov) and HUD program guidance, HUD Handbook 4000.1, REcolorado MLS data via kennarealestate.com, and the Kenna Real Estate Group’s own HUD transaction files.

Contact: call or text 303-955-4220 or homes@kennarealestate.com. During office hours you reach a live local Kenna real estate professional, not a robot or a national call center. Brokerage: Kenna Real Estate Group at Keller Williams Realty DTC, LLC, 6300 S Syracuse Way, Suite 150, Centennial, CO 80111. Each Keller Williams office is independently owned and operated. The Kenna Real Estate Group is an independent real estate team and is not affiliated with or endorsed by HUD or any government agency; official property information comes from HUD Home Store. Equal Housing Opportunity.

Free guide, PDF

The Colorado HUD Home Buyer's Playbook

How HUD bidding really works, the nine ways buyers lose, and the bid worksheet. 18 pages, free.

Why you want it before you bid:

• The 15-day owner-occupant window, day by day, so you never miss a deadline
• The net-to-HUD math HUD actually scores, with a one-page bid worksheet
• The nine ways buyers lose a HUD home, and how each one is avoided

Get the free guideInstant download. We email you a copy too. No spam, ever.