The offers on this page are from advertisers who pay us. That may influence which products we write about, but it does not affect what we write about them. Here's an explanation of how we make money and our Advertiser Disclosure.

Good Neighbor Next Door program: How does it work, and who qualifies?

Yahoo Personal Finance· Getty Images
8 min read

If getting a box of half-price cereal at the grocery store excites you, imagine buying a home at a 50% discount with a program called “Good Neighbor Next Door.” No, it’s not a scam. However, not every house on the market can be purchased through this program, and not everyone qualifies.

Here’s everything you need to know about the Good Neighbor Next Door program, how it works, and whether it’s right for you.

Read more: Types of mortgage loans

In this article:

Good Neighbor Next Door (GNND) is a community revitalization program run by the U.S. Department of Housing and Urban Development that helps law enforcement officers, firefighters, K-12 teachers, and emergency medical technicians (EMTs) buy a home at a 50% discount.

This program aims to improve the quality of life in distressed urban communities by encouraging eligible participants to buy homes in these areas.

To participate in the GNND program, you must verify your employment status, find a HUD-owned home through the HUD Homes database, and buy the house within seven days. You’re responsible for finding your own financing, which can come from any source. However, using an FHA loan, you can qualify for a $100 minimum down payment instead of the usual 3.5%. Using an FHA mortgage also allows you to temporarily buy down your interest rate with the GNND program.

Note that the Good Neighbor Next Door requires you to take out two mortgages: one to finance the 50% you’re paying and another called a “silent second mortgage” that will cover the discount. This second mortgage comes with zero interest and requires no payments or mortgage insurance on your part — provided that you meet the three-year occupancy rule.

The three-year occupancy requirement requires you to live in the property as your sole residence for 36 months. You cannot own property when you submit an offer to buy the home or for one year before the date. If you meet this requirement, as well as the other relevant program criteria, the second mortgage will be released after three years, and you’re free to sell the home if you like.

Learn more: The best FHA loan lenders

The GNND program is a pretty amazing opportunity, but it’s not available to just anyone. You must work in one of the following professions to get 50% off a home’s listing price and potentially put down as little as $100:

  • Law enforcement official. You must work full-time for a law enforcement agency of the federal, state, local, or Indian Tribal government and serve in the area where you’ll purchase the home.

  • Teacher. You must be a full-time teacher at a state-accredited pre-kindergarten through 12th-grade public or private school. The home you plan to buy must be in the school’s district.

  • Firefighters and EMTs. The Good Neighbor Next Door program is also available if you’re employed full-time as a firefighter or EMT by a fire department or EMS responder unit of the federal, state, local, or Indian Tribal government serving the area where the home is located.

There’s no limit on how much you can earn to be eligible for this program, but you must meet your mortgage lender’s credit score requirements to be approved for a loan. If you’re getting an FHA loan, this will be 580 with a $100 down payment or 500 with 10% down.

If you use an FHA mortgage, you must meet certain debt-to-income ratio (DTI) requirements: Your front-end DTI ratio (the amount of your gross monthly income spent on housing expenses) cannot exceed 31%, and your back-end DTI ratio (the amount put toward all monthly debt payments) must be 43% or less. If either DTI ratio is considered “too high,” talk to your mortgage lender — they may be willing to waive this requirement.

Weigh the advantages and disadvantages of Good Neighbor Next Door to decide whether it’s the right program for you.

  • 50% discount. The most obvious advantage of the GNND program is that you get to buy a home for only 50% of the listing price.

  • No income limits. Though Good Neighbor Next Door is only available to people in certain professions, there is no limit on how much they can earn.

  • Low down payment. If you use an FHA loan to finance your home purchase, you can put down as little as $100.

  • You’re limited to specific locations and homes. The GNND program will only help pay for your home if it’s a HUD-owned property in a designated revitalization area.

  • You must live in the home for three years. If you only plan to live in your house for a year or two, the GNND program may not be for you due to its three-year occupancy requirement.

  • Qualifying homes are listed for only seven days. Once houses are listed as eligible Good Neighbor Next Door homes, they stay on the market for only seven days — so you have to act quickly.

Don’t stress if you’re not eligible for the Good Neighbor Next Door program. Check out these alternatives that can also make homeownership more affordable.

Government home loans like FHA, VA, and USDA loans are great options if you’re a first-time homebuyer, a military member, a veteran, or considering purchasing a home in a rural area designated by the USDA.

Teacher Next Door directly offers grants of up to $8,000 to teachers and other school personnel, which don't have to be repaid. Plus, unlike the GNND program, which only allows you to purchase certain properties in designated areas, the Teacher Next Door program will enable you to use the grant to buy any home on the market.

Down payment assistance programs offer grants and low-cost or forgivable loans to make homeownership more affordable for first-time homebuyers. According to the Urban Institute, there were 1,676 fully funded down payment assistance programs in the U.S. as of June 2023. The HUD’s list of home-buying programs is a great place to start your search for a down payment assistance program.

The Homes for Heroes program was established shortly after the 9/11 attack to give back to firefighters, EMS, law enforcement, military members, healthcare professionals, and teachers by providing discounts on services throughout the home-buying process. According to the foundation website, most people save an average of $3,000 when they buy or sell a home using their program.

Read more: How to get a mortgage with 1% down

If you meet the GNND eligibility requirements, your next step is to apply. Here’s a quick guide on how to do so.

  1. Get preapproved for a loan. Because GNND properties are only available on the HUD database for seven days, you’ll want to get preapproved for a mortgage before placing bids.

  2. Find a HUD-registered real estate broker or agent. You must use a HUD-registered real estate broker or agent to place a bid on your behalf. Head to the HUD Homes website and click on “Find Agents” at the top of the page to search for one.

  3. Search for eligible properties. Visit the HUD Homestore website to find eligible properties listed for sale in your state under the Good Neighbor Next Door program.

  4. Submit your bid. Once you’ve found a property you want to buy, your broker or agent will submit a bid in the amount of the home’s original listing price. HUD will then apply the 50% discount if your bid is chosen. If more than one person submits an offer on a home, a selection will be made via random lottery. You’ll also have to make an earnest money deposit of 1% of the home’s listing price (limited to $500 to $2,000). If your offer is accepted, the money will be applied toward your purchase price. If your offer is rejected, you’ll get the deposit back.

  5. Close on the home. If you’ve been chosen as the winning bidder, HUD’s asset manager will ask you and your broker to send a completed form HUD-9548, a mortgage prequalification letter, and other required information within two business days before you can close on your new home. Note that HUD won’t pay your closing costs, so be sure to factor this expense into your home-buying budget.

Revitalization areas are geographic areas designated by the U.S. Department of Housing and Urban Development (HUD) under the National Housing Act. HUD’s aim is to improve these areas by making homeownership accessible to more people.

The Good Neighbor Next Door is free for anyone who qualifies. But even though the HUD helps shoulder half of your home’s price, it doesn’t pay your closing costs. So, you’ll either have to finance your closing costs or pay them up-front. Closing costs typically range between 2% and 6% of your loan amount.

Eligible properties are Real Estate Owned (REO) single-family homes within designated HUD revitalization areas.

This article was edited by Laura Grace Tarpley