Getting an FHA loan in Texas can be a great option for homebuyers but there are specific requirements you need to meet. This comprehensive guide breaks down all the key FHA loan rules and regulations in Texas so you can fully understand the process.
What is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration FHA loans help make homeownership more accessible by requiring lower down payments and credit scores compared to conventional loans
Some key features of FHA loans include:
- Down payments as low as 3.5%
- More flexible credit requirements – minimum 580 FICO score
- Low mortgage insurance premiums
- Funds can be used for purchasing, refinancing, remodeling, or construction
In Texas, FHA loans are popular among first-time homebuyers and those with lower incomes or credit scores. They make it possible to buy a home with less money up front.
FHA Loan Limits in Texas
The maximum FHA loan amount you can borrow depends on location. FHA sets limits for each county based on the area’s median home prices.
In Texas, here are the current FHA loan limits:
- Most of Texas: Up to $398,600
- High-cost areas: Up to $566,950
- Texas county loan limits range from $331,760 to $566,950
High-cost counties include Travis, Harris, Dallas, Collin, and other metro areas. You can check your specific county limit using FHA’s lookup tool. The limits apply to 1-unit properties and are higher for 2-4 units.
FHA Down Payment Requirements in Texas
One major advantage of FHA loans is the low down payment, which makes buying a home more affordable. Here are the FHA down payment requirements in Texas:
- Minimum down payment: 3.5% of purchase price
- Average down payment: $12,500 in Texas
- Down payment funds must be your own; gifts allowed after minimum
- Seller can contribute up to 6% for closing costs and pre-paids
With an FHA loan, you can purchase a $350,000 home in Texas with just $12,250 down. This low requirement makes it feasible for more borrowers. The down payment can come from savings, gifts, grants, or other sources.
FHA Mortgage Insurance Requirements in Texas
All FHA loans require mortgage insurance, also called MIP. This premium insures your loan in case you default. Here’s how it works:
- Upfront MIP: 1.75% of loan amount due at closing
- Annual MIP: 0.45% – 1.05% of loan amount per year
- MIP is paid monthly along with your mortgage payment
- You must pay MIP for at least 11 years or life of loan on some terms
FHA mortgage insurance is typically lower cost than conventional loans. On a $200,000 loan, you’d pay about $250 per month for MIP. Weigh the overall costs when choosing your loan.
Credit Score Requirements for FHA Loans in Texas
FHA loans allow lower credit scores than conventional mortgages. Here are the credit requirements:
- Minimum credit score: 580 FICO
- Average score for approval: 620 to 640 range
- Maximum debt-to-income ratio: 56% with compensating factors
Lenders can approve borrowers with scores as low as 580. But for the best rates and approval chances, aim for at least 620. Minimum scores also vary by lender. Weak credit requires more review but isn’t an automatic denial.
Other FHA Loan Requirements in Texas
Here are some other key requirements for FHA borrowers in Texas:
- Must be used as your primary residence if owner-occupied
- First-time homebuyers must complete counseling if score under 620
- Non-occupant co-borrowers and cosigners allowed
- Buyers with recent foreclosures, bankruptcy or short sales can still qualify
- Manual underwriting available for self-employed or non-W2 income
- Interest rate is based on market rates and your down payment size
The FHA program offers more flexibility than conventional loans. Talk to a lender about your specific situation if you don’t meet every guideline.
How to Find the Best FHA Lenders in Texas
As an FHA borrower, you want to find lenders who specialize in these loans. Here are tips for picking the right lender:
- Search for local lenders who do high FHA loan volume
- Compare interest rates and fees from multiple lenders
- Look for streamlined technology and a fast approval process
- Ask about discounts for buying points to lower your rate
- Read reviews and ask friends or realtors for referrals
- Avoid lenders pushing risky adjustible loans or predatory terms
The right FHA lender will walk you through every step and help you get approved on the most favorable terms. Be sure to get pre-approved before making an offer, so you know what you can afford.
Next Steps to Getting an FHA Mortgage in Texas
If you think an FHA loan is right for you, here are some next steps:
- Check your credit reports and scores before applying
- Calculate your target home price and down payment
- Gather all required documents for the application
- Complete an FHA homebuyer education course if needed
- Shop mortgage rates and connect with a trusted lender
- Get pre-approved once you’re ready to make an offer
With low down payments, flexible guidelines, and the right lender, an FHA loan can be your path to homeownership in Texas. Follow these tips and you’ll be well on your way to buying your dream home.
What is an FHA Loan?
FHA Loans in Texas are easy with Texas Premier Mortgage. No Lender Fees, Low Credit and First Time Home Buyers are easy to qualify. 3.5% Down Payment. An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.The FHA program was created in response to the rash of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans accessible and affordable. Nowadays, FHA loans are very popular, especially with first-time home buyers.
What Are the Advantages of FHA Loans?
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required. Borrowers who cannot afford a traditional down payment of 20 percent or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
- Must have a steady employment history or worked for the same employer for the past two years
- Must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage in your state
- Must make a minimum down payment of 3.5 percent. The money can be gifted by a family member.
- New FHA loans are only available for primary residence occupancy
- Must have a property appraisal from an FHA-approved appraiser
- Your front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, home insurance) needs to be less than 31 percent of your gross income, typically. You may be able to get approved with as high a percentage as 46.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Your back-end ratio (mortgage plus all your monthly debt, i.e., credit card payment, car payment, student loans, etc.) needs to be less than 43 percent of your gross income, typically. You may be able to get approved with as high a percentage as 56.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Typically you must be two years out of bankruptcy and have re-established good credit. Exceptions can be made if you are out of bankruptcy for more than one year if there were extenuating circumstances beyond your control that caused the bankruptcy and you’ve managed your money in a responsible manner. See this page for more details.
- Typically you must be 3 years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
NEW FHA Loan Requirements 2024 – First Time Home Buyer – FHA Loan 2024
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