What Are HUD Homes And How Do You Buy One?
Author:
Victoria ArajJan 18, 2024
•7-minute read
Imagine this: You’re interested in buying a foreclosure, but real estate investors keep purchasing the properties you find. Searching for a foreclosure in the form of a HUD home allows you to escape that frustration.
If you’re considering this less conventional path to buying a house, you’ll want to know what a HUD home is and how to buy one. It’s also worthwhile to weigh the pros and cons of owning this type of home to see if it would be the right choice for you.
What Is HUD And How Does It Impact Homeownership?
Created in 1965, the U.S. Department of Housing and Urban Development (HUD) is one of many federal departments whose leaders (known as secretaries) make up the president’s cabinet.
HUD oversees the Federal Housing Administration (FHA). The FHA is a government agency that insures FHA loans which allow FHA-approved lenders to provide mortgage loans to applicants who wouldn’t ordinarily be able to qualify for a home loan. This makes homeownership more attainable for more people.
With an FHA loan, it’s possible to get a home with a 3.5% down payment and a credit score as low as 580. If you put down at least 10%, you could potentially qualify with a lower credit score (though not all lenders offer this). The minimum qualifying credit score at Rocket Mortgage® is 580.
By contrast, lenders typically require a minimum score of 620 on non-government-backed conventional loans.