What is the Difference between HUD and FHA Loans?


You may have come across a fact that government loans are available for potential homeowners who are suffering from bad credit and/or bankruptcies or foreclosures. The federal government is not involved in the home loan business. But, the interest of encouraging home ownership particularly for low income groups, they are willing to ensure a mortgage for you if you have a low credit score. This means that the government guarantees the lender that they will make well on the loan, if the borrower doesn’t.

FHA versus HUD

The federal government agency is charged with empowering individual home ownership in the US HUD or the Department of Housing and Urban Development via one of its offices, the FHA or the Federal Housing Administration. Although the HUD does ensures loan on its very own, its concern is on the multifamily units, not the individual properties. It is only the FHA that insures the mortgage loans for the individual family home buyers.

The Assumable Advantage

The FHA insured loans are assumable. In other words, that whoever purchases your property can purchase it over from you, while the regular mortgages usually are not. The purchaser has to be eligible for meeting the terms of the FHA. Once he is approved, he is assumed of all the duties of the mortgage upon the property’s sale, relieving the seller from all the liability. In many cases, the seller is held responsible for the debt, if the purchaser doesn’t sign a liability release from the loan agent. In other words, if the buyers fail to make the payment, the credit of the seller could be affected significantly. An assumable FHA loans help to create a competitive benefit when it comes to selling particularly if the existing interest rates are higher than the current rate on the FHA loan.


The loans guaranteed by the FHA are a part of the HUD’s mandate to empower the home ownership. If you have a good credit status, but are low on funds for down payments, an FHA loan can assist you in becoming a homeowner. Due to the limits on the property purchase price, housing type, choices on loan, plus the cost of mortgage insurance, you are more compatible with the regular mortgage if you have significant cash on hand. It all roots down to exploring the options completely.

For more, visit onqfinancial.com/home-loans/fha-loan/.