Texas residents with lower credit scores or incomes have several financing options when purchasing homes for the first time. One particularly great option is a Federal Housing Administration (FHA) loan, provided by an FHA-approved lender and insured by the FHA — a division of the U.S. Department of Housing and Urban Development.
FHA loans in Texas require homeowners to make mortgage insurance premium (MIP) payments each month, but they are still an excellent way for borrowers with lower credit scores to purchase residences.
How do you qualify for an FHA loan in Texas?
Texas FHA mortgage lending limits can fluctuate based on local housing prices and the type of housing a person wishes to purchase. FHA-approved financial institutions will look over an applicant’s qualifications and evaluate their ability to repay the loan.
Before choosing an FHA-approved lender in Texas, talk to multiple banks or credit unions to find the best option. FHA mortgage rates vary depending on the county and the overall state of the housing market. Certain lenders may also provide for particular needs, such as in-person consulting or an online customer access portal. Overall, it is essential to find a lender that fits your needs and financial circumstances.
Before seeking an FHA loan in Texas, borrowers should ensure that they meet the following requirements:
- Their debt-to-income ratio should be 50% or less, based on their overall credit history and score.
- Their credit score should ideally be at least 580.
- They must utilize the property as their primary place of dwelling.
- They should be employed with proof of income.
- They must be able to make mortgage insurance payments to the FHA, which requires two types of mortgage insurance:
- MIP: Paid each month as part of the loan term repayment
- UFMIP: Paid when closing and added to the final loan amount
What are the down payment requirements for FHA loans in Texas?
When obtaining an FHA-backed loan in Texas, borrowers must put down a minimum of at least 3.5% of the home’s value upfront. Individuals with credit scores from 500-579 will be required to make 10% down payments. However, putting less than 10% down on an FHA loan can cost homebuyers more money in the long run. These homebuyers won’t be able to cancel annual mortgage insurance premium payments, so they will be attached to the loan until the homeowner chooses to sell or refinance the property.
Unfortunately, even a down payment of 20% won’t eliminate FHA mortgage insurance payments, which must be paid as an upfront insurance premium payment and a monthly mortgage payment. Homeowners must pay for insurance for a minimum of 11 years and a maximum of the full length of the loan, depending on the loan-to-value ratio and other factors. However, making a larger down payment will lower the principal balance and overall interest paid over time, and — unlike some conventional mortgages — borrowers won’t be charged penalties if they pay off their mortgages early.
Borrowers who need help with down payment and closing costs can take advantage of numerous state-supported assistance programs in Texas, including the Home Star program, Homeownership Across Texas, the Homes for Texas Heroes program, and more.
What are the FHA loan limits in Texas?
Although FHA mortgage loan limits in Texas can fluctuate, they are usually set according to current housing market conditions and types of homes. FHA loan limits can vary by county, ranging 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 home.
Get the information you need.
FHA loans allow Texas homebuyers with lower credit scores and incomes to purchase homes. If you need an FHA loan, consider Texas Tech Credit Union. We are an FHA-backed lender, and we offer very competitive rates.
Interested in securing an FHA loan? Schedule an appointment with one of our dedicated mortgage loan officers today!