case stady ilustrator 01
HUD Loans

What are HUD loans?

Housing and Urban Development (HUD) loans are mortgage loans that are offered by private leaders who are approved by the Department of Housing and Urban Development and insured by the Federal Housing Administration (FHA). Housing and Urban Development loans are designed to help programs that address America’s housing needs. These loans help enforce fair housing laws which helps further improve and develops the nation’s communities.

How does HUD loans work?

Housing and Urban Development (HUD) loans are insured by the Federal Housing Administration (FHA) This insurance/protection allows lenders to accept low down payments and approve people whose credit may not be perfect. For this to happen, the Department of Housing and Urban Development requires borrowers to pay an upfront mortgage insurance premium (MIP) and a monthly insurance premium that is added in with their mortgage payment. The cost of the premium varies based on the down payment and loan amount.

How do you qualify for a loan?

There are a few basic requirements that need to be met such as a minimum credit score of 500 to 580, a 3.5% minimum down payment and a debt-to-income (DTI) ratio of 43%. The Federal Housing Administration (FHA) makes exceptions to general requirements as it was created to make homeownership affordable for Americans. This loan is significantly easier to qualify for than other mortgage options.

Example

HUD Loan

Down Payment = $15,750
Down Payment = 3.50%
Purchase Price = $450,000

Traditional Loan

Down Payment = $90,000
Down Payment = 20%
Purchase Price = $450,000

How to apply for a HUD loan?

Before applying for a Housing and Urban Development (HUD) loan; research the loan program at www.hud.gov, contact the Department of Housing and Urban Development (HUD), fill out a lender’s application, request a credit report, provide any required documents, pay all closing costs, the properties down payment, and the mortgage insurance fee.

What happens if I can’t meet payments?

If the borrower can’t make their mortgage payment, the lender will have to foreclose on the property. The Department of Housing and Urban Development is responsible for the amount owed on the property in a foreclosure. The department then assumes ownership of the property and sells it at market value.