HUD loans are popular because of their attractive interest rates and low down-payment requirements. While it’s typically easier to qualify for a HUD loan than a conventional mortgage, there are still some stipulations that borrowers must meet. The FHA isn’t going to back a loan that’s too risky. This means that you’ll still need a decent credit score, proof of employment, and a good debt-to-income ratio. Below, we’ve provided some information on HUD loans and the requirements for borrowers.
What Is a HUD Loan, Anyway?
A HUD loan is a type of loan that’s insured by the federal government. These loans are backed by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).
FHA loans have been around since 1934 and are still popular today because they offer:
- Low down-payment requirements
- Lower closing costs
- Relaxed credit score requirements
Who Can Get a HUD Loan?
Anyone who meets FHA loan requirements can get a HUD loan. The only additional stipulations are that the borrower must use the property as their primary residence and have no outstanding federal debt or collections.
Borrower Requirements for HUD Loans
HUD loans, more commonly referred to as FHA loans, have requirements that apply to both the borrower and the property itself. Here are some of the requirements that borrowers must meet:
- Credit score of 500 or better
- Debt-to-income ratio of 50% or less
- 5% down payment for a borrower with a credit score of 580 or higher
- 10% down payment for a borrower with a credit score between 500 to 579
- The borrower must use the home as their primary residence
HUD Property Requirements
When you’re buying a home with a HUD loan, the property must be up to standard with the FHA’s requirements. FHA property requirements include:
- The home must be the borrower’s primary residence and it must be occupied by the borrower within 60 days of closing.
- The home cannot be used for investment purposes.
- An FHA appraisal must occur and the home must meet the FHA’s minimum property standards.
- The property cannot be bought within 90 days of a prior sale.
- The title must be in the borrower’s name or in the name of a living trust at settlement.
- The property must meet FHA loan limits. These vary by county.
Apply for a HUD Loan Today
Wondering if you check all the boxes for HUD loan requirements? Apply today and find out or contact Mortgage Solutions Financial to speak to an expert.
