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.