HUD, or the Department of Housing and Urban Development, has a primary goal of helping families purchase and own a home. This is accomplished by providing FHA low cost and low down payment loans which are backed by the federal government. These FHA loans are easier to obtain as credit history is usually not as important, and down payments can be as low as 1 – 3% instead of the typical 20%. This makes it extremely feasible for first time home buyers to obtain an FHA loan and purchase a primary residence.
It should be noted that HUD mortgages (which are really FHA loans) should not be confused with HUD homes. HUD homes are homes that have been foreclosed on which were financed with a FHA loan. These homes can be purchased with HUD mortgages (FHA loans) as long as the purchaser is a first time home buyer and qualifies for the HUD program. HUD homes can be a cost effective way for first time home buyers, but beware that these homes usually require a lot of repair work. Since HUD homes are foreclosed homes, they are usually not in the best of shape. The benefit rather is that usually HUD homes can be purchased at a discount compared to comparable homes in the same area.