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Good Neighbor Next Door Program: How It Works

This federal program offers bargain-priced homes to teachers, police officers, firefighters and EMTs, but very few homes are available.

Robin Rothstein
Barbara Marquand
Chris Jennings
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The Good Neighbor Next Door program might sound almost too good to be true: Teachers, law enforcement officers, firefighters and emergency medical technicians can buy homes for 50% off the list price and finance the purchases with down payments as low as $100.
But there's a big limitation to understand before getting your hopes up. The program may have no homes, or only a handful of properties, available for purchase in your state.
Here's what you should know about the program, as well as some alternatives to consider if you want help buying a house.

What is a Good Neighbor Next Door home?

The homes that are available for purchase are foreclosed properties that were financed by FHA mortgages, which are loans insured by the Federal Housing Administration. After foreclosure, the U.S. Department of Housing and Urban Development, or HUD, becomes the owner of the properties and offers them for sale.
The program requires participants to take out two mortgages — one finances your 50% discounted share of the list price and the “second silent mortgage,” covers the remaining 50% discount amount. You’re not required to make any principal or interest payments on the second mortgage, as long as you live in the home as your primary residence for a minimum of 36 months. Once you hit that threshold, the second mortgage is released and no more HUD requirements remain.
Good Neighbor Next Door homes are all located in neighborhoods designated as “revitalization areas” to expand homeownership opportunities. HUD works with local governments across the country to designate revitalization areas in neighborhoods that have relatively low median household income, high foreclosure rates and low homeownership rates.
Although there are many revitalization areas, the supply of homes for the Good Neighbor Next Door program is very limited.

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Who can qualify for Good Neighbor Next Door

You may qualify if you're a full-time law enforcement officer, teacher, firefighter or emergency medical technician who works for an agency, school or department serving the area where the home is located.
You or your spouse must not have purchased a Good Neighbor Next Door home before or have owned any home in the year before bidding on a property in the program.

Other requirements

You must also:
  • Certify your intention to continue working as a law enforcement officer, teacher, firefighter or EMT for a year after the home purchase.
  • Agree to own and live in the home as your sole residence for three years, and annually certify that you're living there during that period. HUD mails the certification every year, and the homeowner must sign and return it to verify you’re still in compliance. Even one missed certification can result in an investigation. Falsifying a certification is a felony and can result in prosecution.

How to buy a Good Neighbor Next Door home

You can search for homes for sale through the Good Neighbor Next Door program at the HUD Homestore website.
  1. First, click on the Good Neighbor Next Door tab above the map.
  2. Then click on a state to see available properties. The gray states currently have no homes for sale through the program. 
  3. To get more information about a home, click the hyperlinked address in the list view or select “View Property Details” from any map pin. Each listing includes photos and information like square footage, number of rooms and the year the home was built.
To make a bid, you'll need to work with a real estate agent who is a registered HUD broker. The HUD Homestore website has a tool for finding one in your area. The broker submits the bid electronically for the full list price, and then HUD will apply the 50% discount. If more than one person makes an offer, the buyer is selected by lottery.
🤓 Nerdy Tip
The inventory of homes changes weekly, and the homes are sold “as is.” If you find a property you want to purchase, you'll have to act quickly — you have just seven days to make a bid.
» MORE: Buying a fixer-upper: What you need to know

Mortgage options for Good Neighbor Next Door buyers

You can use any type of mortgage to buy a Good Neighbor Next Door home, as long as you meet the lender's requirements. However, using an FHA loan has special benefits, such as:
  • Required down payment as low as $100
  • Closing costs can be financed
  • Minimum down payment as low as 3.5%
You can also use an FHA 203(k) loan, a renovation loan that rolls the cost of needed repairs into the mortgage.
One disadvantage with using an FHA loan is that you’ll be required to pay an annual mortgage insurance premium (MIP). You must pay the premium for a minimum of 11 years if you put down 10% or more — and for the life of the loan if your down payment is less than 10%. However, you could eliminate MIP by refinancing the FHA loan to a conventional mortgage once you satisfy the Good Neighbor Next Door three-year occupancy requirement.
🤓 Nerdy Tip
It's important to get preapproved for a mortgage before shopping for any type of home. A mortgage preapproval is an offer from a lender to loan you a certain amount under specific terms. You'll want that preapproval in your back pocket when making an offer.
The mortgage through a lender pays 50% of the home's list price, and the second silent mortgage finances the other half of the price. Again, you don’t have to make any payments on that second mortgage as long as you meet the program's requirements. You’re then released from the second mortgage after living in the home as your sole residence for three years.

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on New American Funding

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Alternatives to Good Neighbor Next Door

A 50% discount from the list price on a home is hard to beat. But there are other programs and options that help people buy and finance homes. Here are some to consider.

Homes for Heroes

Current or former first responders, teachers, military members and health care professionals can save money on certain homebuying services through the Homes for Heroes program. The program has a network of real estate agents, mortgage professionals, home inspectors and other service providers who offer rebates, which can help save on closing costs.
» MORE: Homes for Heroes: Assistance for buyers and sellers

Homebuying programs for teachers

A variety of mortgage and down payment assistance programs are available for educators through local and state government agencies, unions and some lenders.
» MORE: Teacher Next Door and other home buyer assistance for educators

Down payment assistance programs

Many states, counties and cities offer programs to help home buyers pay the down payment and closing costs on a house. The help comes in the form of grants, forgivable loans and low-interest loans.
» MORE: Down payment assistance: How to get help buying a house

First-time home buyer programs

Many state housing authorities offer a variety of mortgage programs, including down payment and closing cost assistance, for those who haven't owned a home for three or more years. Some mortgage programs are specifically geared toward teachers, law enforcement officers, firefighters and EMTs.
» MORE: First-time home buyer programs by state

Home buyer education classes

These free or low-cost HUD-approved classes are often required to get particular low-cost mortgages or down payment assistance. But it can be worth taking a class even before you apply for help. The classes cover such topics as how to comparison shop among real estate agents and lenders, how to improve your credit score and which mortgage loan products to consider.

Mortgage loans from our partners

NBKC

on NBKC

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4.5

NerdWallet rating
Min. credit score

620

Min. down payment

3%

New American Funding

on New American Funding

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4.0

NerdWallet rating
Min. credit score

N/A

Min. down payment

0%

GO Mortgage

on GO Mortgage

GO Mortgage

4.0

NerdWallet rating
Min. credit score

620

Min. down payment

3%

COMPARE MORE LENDERS
» MORE: First-time home buyer class: Why take it?
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