Texas residents have an array of choices when it comes to home loan options. Conventional, Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans can all help potential borrowers obtain the money they need to purchase a home.
Each type of loan has different requirements, regulations and limits, so let’s take a closer look at VA and FHA loans and their limits in Texas:
What are the current FHA loan limits?
A Federal Housing Administration (FHA) loan is insured by the federal government and granted through an approved lender. A division of the US Department of Housing and Urban Development, the FHA backs mortgages issued by private lenders. These types of loans are often used by individuals with lower credit scores or short credit histories.
FHA mortgage loan limits in Texas are typically based on current housing costs and the type of home the borrower wishes to purchase. As of 2021, the FHA loan limit in Texas varies by county and ranges anywhere from $356,362 to $416,300 for a single family home; $456,275 to $516,750 for a two-family structure; and $551,500 to $624,600 for a three-family residence.
How can I qualify for an FHA loan?
A potential borrower seeking a Texas FHA loan should meet the following requirements:
- Have a debt-to-income ratio of 50% or less, based on their overall credit history and score.
- Be able to put down a minimum of 3.5% of the total price of the residence — a down payment can be obtained through a grant for assistance, from a savings account or through other income sources.
- Have a credit score of at least 580.
- Have solid proof of income and employment.
- Plan to use the property as their primary residence.
- Pay for mortgage insurance through premium payments to the FHA, which requires two different kinds of mortgage insurance:
- MIP: Collected monthly as part of the loan repayment
- UFMIP: Paid at closing and combined with the final loan amount
FHA limited 203(k) loan limits
A second form of FHA loan, a limited 203(k) mortgage, can be used to make repairs, renovations or upgrades to a residence. A 203(k) loan can even be used to make improvements prior to the sale of a residence.
Borrowers seeking limited 203(k) loans cannot ask for more than $35,000, and any upgrades cannot require any type of extensive architectural or engineering work. To obtain a limited 203(k) loan, a borrower must have a credit score of at least 620 and repairs must typically be completed within six months, although it is possible to ask for a deadline extension.
A limited 203(k) loan can be used to pay for the following repairs or updates:
- Removal of potential health or safety hazards
- Replacement of gutters or roofing
- Removal and installation of new floors
- New landscaping, such as a garden
- Upgrades to the plumbing system
- Updates to the home’s appearance, both external and internal
- Upgrades to functional aspects of the home, such as air conditioning
- Alterations to the internal and external structure of the residence
What are the current VA loan limits?
Department of Veterans Affairs (VA) loans offer convenient, affordable ways for service members, veterans and eligible spouses to purchase homes. Established in 1944, the VA home loan program allows the VA to insure and guarantee debt obligations for residential, business or farm loans issued by private lenders. More than 25 million VA loans have been granted to active members of the military, veterans and their spouses since 1944.
To qualify, military service members must meet the allotted periods of eligibility. Although it’s not required, selecting a lender who specializes in VA loans can be helpful.
How can I qualify for a VA loan?
To obtain a VA loan, potential applicants must find a lender that issues VA-supported loans. Once they’ve completed this step, they can obtain a certificate of eligibility, which proves that they meet specific standards and allows them to receive benefits.
A certificate of eligibility can be granted through a lender portal or through the Department of Veterans Affairs website. Surviving spouses of military members and some service members can also obtain this document by requesting it through the mail.
Once applicants have their certificate of eligibility, they can prequalify for a VA loan by visiting an eligible financial organization with their current employment status, income, credit history and more. This step can identify any potential issues the borrower may face during the application process.
Do you qualify for a VA or FHA loan in Texas?
VA and FHA loans are ideal ways for Texas residents to purchase homes, so long as they qualify and understand the state’s loan limits. To learn more about how VA loans or FHA loans can help you find your dream home, contact Texas Tech Credit Union today.