To purchase a HUD home using an FHA loan, your eligibility is primarily determined by your .
Lenders will also evaluate several other criteria to offset the risk of a low credit score:
HUD homes are sold and may require significant work.
: You can often apply for an FHA loan just 12 months into a Chapter 13 repayment plan or 24 months after a Chapter 7 discharge.
While the FHA sets a baseline score of 500, many private lenders—such as Rocket Mortgage or Freedom Mortgage —apply their own stricter rules called "overlays".
: You are typically eligible for "maximum financing," which allows for a down payment as low as 3.5% .
: Most lenders prefer a DTI of 43% or lower , though some may allow up to 50% if you have "compensating factors" like high cash reserves.