buy a home in texas with an FHA loan

A Texas FHA loan is perfect for home buyers who may have lower credit scores or are unable to make large down payments.

FHA loans in Texas are the most popular first-time home buyer loan because of their low down payment requirements, lenient credit requirements, and flexible lending standards.

It’s considered a government loan and has lower interest rates than a conventional loan. 

Here’s everything you must know about the FHA loan in Texas.

FHA loan requirements in Texas

FHA loan requirements are the most relaxed out of any home loan program in Texas today.

You don’t need perfect credit or a large down payment to qualify.

Credit Scores

Borrowers can secure FHA financing in Texas with a credit score as low as 580.

We at Coole Home have a minimum credit score requirement of 620. Not all mortgage lenders have the same requirements.

You don’t need a perfect credit history, but if you’ve had a bankruptcy or foreclosure, you’ll need to wait a few years before you can qualify.

Having a bankruptcy or foreclosure on your credit is a non-issue as long as enough time has passed and credit has been rebuilt.

Can I get a loan in Texas after a bankruptcy?

With an FHA loan it’s easy to qualify after bankruptcy.

For a chapter 7, you can be eligible 2 years after the discharge date (conventional requires 4 years).

A chapter 13 requires only one year from the filing date. You must provide proof that 12 months of payments have been made on time, and a trustee approval is also required.

Can I get an FHA loan in Texas after a foreclosure?

You could be eligible for an FHA loan after foreclosure within 3 years from when the title was taken out of your name.

This is an important date that officially transfers the property being foreclosed from you to the bank or new home buyer.

Once your name is taken off, 3 full years must pass before you apply for an FHA loan. Other mortgage types, such as conventional loans, require 7 years after the foreclosure.

A short sale has the exact requirement as above unless you never had late payments on your mortgage. 

Are there any exceptions? No, these are the FHA loan requirements that the federal government has placed on this mortgage loan type.

Related: Buying a House After Foreclosure

Debt-to-Income ratios

The FHA loan program has flexible debt-to-income ratio requirements.

For example, unlike conventional loans, which require a maximum 41% debt ratio, you can secure financing with a debt to income ratio as high as 56%.

This means your total debts (mortgage, credit card payments, installment loans, etc.) can total up to 50% of your gross monthly income (income before taxes).

Related: Debt to income ratio requirements and how it’s calculated.

Down payment for an FHA loan

Borrowers need at least a 3.5% down payment, but there is some flexibility in this requirement.

We also have a no down payment FHA loan in Texas. However, the no down payment loan has a higher interest rate.

You can also receive a gift from a family member to pay for the down payment.

In addition to the down payment, there are also buyers closing costs.

FHA Texas property requirements

In addition to you qualifying, the property must be eligible too. The property is the collateral lenders use to approve you for the loan. Properties must meet the following requirements to secure FHA financing.

Principal residence requirements

You must prove you’ll live in the property full-time as your primary residence. The loan isn’t for second homes (vacation homes) or investment homes to rent out.

However, there’s one exception – if you purchase a multi-unit property and live in one unit, you can rent out the remaining units even with FHA financing. No matter the property type, within 60 days, at least one borrower must occupy it.

Property types in Texas

FHA is flexible with the available property types for financing in Texas. A property can be:

• Single-family home

• Condo (condo complexes have to be FHA approved)

• Townhouse (Townhome complexes typically have to be FHA approved but depends on the complex)

• Multi-family home (1 – 4 units)

Manufactured home on a permanent foundation

• Mobile homes on a permanent foundation (must be at minimum a doublewide)

• Modular homes

Passing the appraisal

All properties must pass an FHA appraisal.

Unlike the myths, FHA appraisals aren’t difficult to pass, but if the home isn’t up to code or has significant issues, the repairs would need to be done before closing.

If there are significant repairs, like a roof issue, you may require an FHA 203(k) loan that covers both the cost of purchasing a property and renovating it.

No flipped properties

FHA loans doesn’t allow buyers to purchase a home that the seller is ‘flipping.’

A property is considered a flip if the seller bought the house within the last 90 days. It’s called the FHA flipping rule

It’s is too risky for you and the lender since the price may not reflect the property’s actual value.

FHA loan limits

FHA loan limits vary by county. It varies based on the average home price in the area. Some Texas counties have limits up to $571,550 and the lowest being $472,030.

These are the limits of the maximum amount you can finance – but you must still qualify for the loan amount..

Texas FHA loan limits

For most counties the FHA loan limit is $472,030 through year 2023.

There are a few Texas counties that have higher limits. You can visit the FHA loan limit – Texas page for a list of what those are.

How FHA loans work

FHA loans are simple.

You apply for the loan like you would any other loan, providing the lender with your personal identifying and financial information. In addition, you must prove you have the credit score, income, and low enough debts to qualify.

You must also prove you have at least 3.5% to put down on the home and the money to cover the buyer closing costs.

You can secure a 15, 20, 25, or 30 years loan term with a fixed interest rate. 

You must make the principal and interest payment each month but may pay the loan off early without worrying about a prepayment penalty.

The monthly payment on an FHA loan includes the principal and interest, mortgage insurance, property taxes, and homeowners insurance.

Read more: Which is Better? 15yr or 30yr Mortgage?

The benefits of FHA loans in Texas

FHA loans in Texas have many benefits over other financing options, including:

• Low down payment requirements

• Flexible credit score requirements with the lowest threshold out of any loan program

• Flexible debt-to-income ratio requirements (higher ratios allowed than other programs)

• Competitive interest rates

• Access to the FHA streamline refinance if rates drop or you want to refinance out of an ARM

• The option to apply for an FHA 203(k) loan if you’re buying a fixer-upper

Why choose an FHA loan?

So why should you choose FHA loans in Texas when you have other options? Here are the most common reasons.

  1. The guidelines are among the most flexible out of any loan program, including other government-backed loans. You can get by with a less than perfect credit or higher debt ratio and still get competitive rates.
  2. It’s an excellent program for first-time home buyers who don’t have a lot of money to put down. You need only 3.5% of the purchase price, and you may be able to use gift funds or get a no-down payment FHA loan.
  3. You can tap into your equity down the road with an FHA cash-out refinance or refinance with the streamlined FHA program that requires little verification but provides access to lower rates and better terms.
  4. It’s easy to qualify for after a bankruptcy or a foreclosure and still get competitive rates.
  5. FHA loans include homeowners insurance and property taxes in the mortgage payment so you don’t have to worry about paying these bills every year.

Read on: FHA loan versus a Conventional loan

FHA in Texas – Summary

An FHA loan is among the most flexible loan programs you can apply for when buying a house. If you have blemished credit, a small down payment, or a high debt-to-income ratio, it’s the most forgiving home loan program available today.

The FHA appraisal isn’t hard to pass, and the guidelines are easy for anyone, whether a first-time homebuyer or subsequent homebuyer, to secure financing for a new primary residence.

Are you ready to move forward? Start an inquiry for an FHA loan by completing the form below.

  • Are you looking to buy or refinance a home?
  • What is your price range?
  • Do you currently own a home?
  • What type of property are you buying?
  • When are you planning to make your home purchase?
  • Have you (or your spouse) ever served in the US military?
  • Have you declared bankruptcy in the past 7 years?
  • Is this your first time purchasing a home?
  • What is your current credit score?
  • What is your email address?
  • What is your name?
  • What is your phone number?

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