Key Benefits of FHA Loans
FHA loans are insured by the Federal Housing Administration, making them less risky for lenders and more accessible to a wider range of homebuyers.
Low Down Payment
With an FHA loan, you can purchase a home with as little as 3.5% down if your credit score is 580 or higher.
Flexible Credit Requirements
You may qualify for an FHA loan with a credit score as low as 500 (with a 10% down payment) or 580 (with a 3.5% down payment).
Higher Debt-to-Income Ratio Allowed
FHA loans often allow a higher debt-to-income ratio than conventional loans, making it easier to qualify if you have other debts.
Down Payment Assistance
FHA allows down payment funds to come from gifts, grants, or assistance programs, making it easier for first-time buyers to get into a home.
FHA Loan Eligibility
Credit Score
Minimum credit score of 500 with a 10% down payment, or 580 with a 3.5% down payment. Higher scores may qualify for better terms.
Debt-to-Income Ratio
Your total monthly debt payments should generally not exceed 43% of your gross monthly income, although exceptions can be made in some cases.
Employment History
You'll need a steady employment history, generally with at least two years in the same field, though exceptions may apply for recent graduates.
Property Requirements
The home must be your primary residence and meet FHA property standards and requirements for safety, security, and soundness.
Mortgage Insurance
FHA loans require both an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP) that is paid monthly.
Loan Limits
FHA loan limits vary by county and are based on local housing costs. In Texas, these limits range from $472,030 to $726,200 for single-family homes in 2023.
Types of FHA Loans
FHA 203(b)
The standard FHA loan for purchasing or refinancing a primary residence. Offers low down payments and flexible qualification requirements.
- •15 or 30-year fixed-rate terms
- •Adjustable-rate options available
- •As little as 3.5% down payment
FHA 203(k)
A rehabilitation loan that allows you to finance both the purchase of a home and the cost of its rehabilitation through a single mortgage.
- •Great for fixer-uppers
- •Limited and Standard options
- •Streamlines renovation financing
FHA Streamline Refinance
Allows current FHA loan holders to refinance quickly and easily, often without an appraisal and with minimal credit verification.
- •Reduced paperwork
- •No appraisal often required
- •Lower mortgage insurance premium
Frequently Asked Questions
How long do I have to pay FHA mortgage insurance?
For loans with a down payment of less than 10%, you'll pay mortgage insurance for the life of the loan. With a down payment of 10% or more, you'll pay mortgage insurance for 11 years.
Can I get an FHA loan after bankruptcy or foreclosure?
Yes, but you'll need to wait at least two years after a Chapter 7 bankruptcy, one year after a Chapter 13 bankruptcy (with court approval), or three years after a foreclosure.
Are there any property restrictions with FHA loans?
FHA loans are for primary residences only, not investment properties. The property must also meet FHA minimum property standards for safety, security, and soundness.
What's the difference between FHA and conventional loans?
FHA loans have more flexible credit requirements and lower down payment options but require mortgage insurance for all borrowers. Conventional loans may offer lower monthly payments for borrowers with excellent credit but typically require higher credit scores.