|FHA Housing refers to HUD homes that are available for sale on a mortgage insured by the Federal Housing Administration. There are certain guidelines which must be followed to qualify for an FHA-insured loan to buy a HUD home. One can check HUD resources or get assistance from a certified counseling agency to learn about the different aspects – loan requirements, inspection requirements, housing expense ratio, ratio limit, price index, minimum housing standards and more. We are here presenting you a brief overview only. For more comprehensive and authentic information refer to the HUD website.
FHA Housing Loans
FHA is a federal agency controlled by the US Department of Housing and Urban Development. It is not a lender in itself, but an insurer of residential mortgages made by an approved lender. The loan limits vary from one area to another and one has to talk to a local lender to know the amount of money they can borrow and also the conditions they must meet to qualify. The area-wise mortgage limits can be checked at https://entp.hud.gov/idapp/html/hicostlook.cfm. For more information, you can refer to ML 10-40, 09-50, and 07-01.
The list of HUD homes for sale can be seen at HUD Home Store, a listing website maintained by the Department and that also contains a FAQ section to answer most of your questions. It is mandatory to complete the inspection requirements before purchasing a home and verify that the housing structure is in good condition. In case the property needs a significant amount of repair work you might be interested to apply for FHA 203(k) Rehabilitation Loan or Streamline Refinance Loan. By the way, there are several other housing loan programs at FHA.
FHA Housing Loan Requirements
The general requirements to qualify for an FHA-backed housing loan are that you must be a US citizen and you must have a valid social security number. The other requirements vary from one lender to another, but these are more or less close to the guidelines that HUD issues through its Mortgagee Letters and Handbooks. The minimum FICO credit score required to qualify for FHA housing loan is set at 580, however lenders usually want the score to be in the range of 620-640 in order to play extra safe.
It may be possible to find some lenders who offer a mortgage option even below the FHA credit standards, but the borrower has to fulfill some other more stringent requirements, such as putting down more money than a usual FHA loan requires, and that too from their personal funds. The usual down payment requirement is 3.5 percent of the purchase price as per the regulations under Housing and Economic Recovery Act of 2008.
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