Info on HUD vs. FHA loan?
From someone experienced with these, what are the major differences between the two? Which is a better option for someone with poor credit as of 2 years ago, but taking steps to improve their credit? For HUD, are there only certain homes that can be purchased?
I really know nothing about these two things and would appreciate if someone could give some of the important information about them.
Would I be able to meet with my local housing authority office to discuss both HUD & FHA, or are these completely different things?
Sorry for my obvious lack of knowledge, never been in this boat before.
- loanmasteroneLv 78 years agoFavorite Answer
FHA is a government backed mortgage loan. Even though your would apply for a FHA mortgage loan through a bank or lender as you would any conventional mortgage loan, the difference between a conventional mortgage loan is that the federal government would guarantee the bank or mortgage lender that if for some reason you fail to make the monthly mortgage payments as you agreed to when you signed your mortgage loan docs the federal government would pay the bank the balance of the mortgage loan. Instead of the foreclosed on house becoming an nonperforming asset of the bank, the house you purchased would then become a HUD foreclosure for resale.
HUD is the sort of like an arm of FHA that would take the responsibility of taking all nonperforming foreclosed assets (houses) of FHA, placing them in a position to be resold to the public or private investors.
You may obtain a FHA mortgage loan to purchase a HUD property. In order to purchase a HUD owned property, you would be required to find a local HUD approved real estate agent.
The first order of business for you would be to find a local mortgage lender that is approved to do FHA mortgage loans. You would find a mortgage loan officer and get pre-approved to purchase a house. This pre-approval would indicate how much you would be allowed to spend on the purchase of a house, based on your income and the amount of debts you would be required to pay each month on your credit report. After your pre-approval the next steps to purchasing a house would fall into place.
If you are pre-approved to purchase a house, apparently your credit problems are not as great as you thought.
If you would not be approved, your mortgage loan officer would be able to inform you of the necessary steps to take in order to be approved. If credit is a major problem he might have a referral that would assist you in clearing up your credit problems.
After your pre-approval you would be able to contact a real estate agent to find a property you would be qualified to purchase a house based on your pre-approval. Your pre-approval would allow you to purchase any property that attract you, to include HUD properties, bank owned properties, short sales as well as those that are offered by individuals.
I hope this has been of some benefit to you, good luck.
- Anonymous4 years ago
FHA loans are NOT score based but use your last 2 years credit, employment and rental history. You MUST not have any lates at all in the previous 24 month period. Additionally, no bankruptcies in the past 4 years. FHA programs the property MUST pass an inspection as well. Older homes may not pass (roof must have 5 years life left etc) Your lender should explain ALL of this to you. With the lower down payment you MIP (mortgage insurance premium) requirement will be higher that is you put more money down 10%. So in theroy, the lower interest rate may cost you more monthly. Make yourlender show you side by side BOTH programs. Then evaluate your savings and monthly costs - pick the loan that best FITS YOU. Hope this helps.
- acermillLv 78 years ago
HUD only works with homes actually for sale through HUD. FHA is available for ANY home. Both are more lax with credit requirements when working through their systems.
- Go with the flowLv 78 years ago
It would depend on your income.
Sorry for the vague answer, but it's true.