FHA Loans In Texas

Are you considering financing your home purchase with an FHA loan in Texas? Perhaps you’ve been looking all over America for your next home and are wondering “How can I get an FHA loan in Florida?” or maybe you’d like to know about the FHA loan requirements in North Carolina.

The Lone Star State offers many reasons to buy a home. Low cost of living, affordable housing, no state income taxes, and many others are great reasons to choose Texas. So now that you’ve decided to buy a home in Texas, let’s look at obtaining an FHA loan in this amazing state.

What Is An FHA Loan And What Are Its Advantages?

An FHA (Federal Housing Administration) loan is a type of mortgage loan guaranteed by the United States Government. It is a great choice for people buying their first home, as well as anyone who is looking to purchase a home for use as their primary residence.

An FHA loan offers several advantages:

First, it offers a down payment requirement that’s lower than conventional loans, which is great for young families or borrowers who may not have a large sum of money ready for use as a down payment.

Next, it offers income requirements that are more flexible and easier to qualify for.

Lastly, it offers more flexibility in where your down payment funds come from.

What Are The Requirements For An FHA Loan?

Simply put, it is easier to pass the requirements for an FHA loan than a conventional loan that you would obtain through a financial institution. So let’s take a look at some, but not all, of the primary requirements of an FHA loan:

Have A Down Payment Of At Least 3.5% Of The Home’s Value.

• For example, if the home is valued at $200,000, a down payment of $7,000 would be required.

Acceptable Debt To Income Ratio

• Your total cost of housing including mortgage payment, homeowners insurance, and property taxes should total no more than 31% of your gross income before taxes.
• Your housing costs plus any other payments such as monthly car or credit card payments when added together should not exceed 43%.

Minimum Credit Score Of 580 Or Higher

• This can be flexible depending on your down payment amount and annual income.

The Home Must Be Your Primary Residence

• An FHA loan can not be obtained for an investment property, rental property, or a second home. It must be for your primary residence where you intend to live the majority of the time.

The Loan Amount Must Be Less Than The FHA Loan Limits

• For most states and areas this limit is $420,680. However, if you live in a high cost of living area the FHA has higher loan limits available. Sometimes as high as nearly a million dollars, depending on the county or area you choose to live.

When Is An FHA Loan Not Appropriate?

An FHA loan may not be appropriate if one of the following circumstances applies to you:

The Home Will Not Be Your Primary Residence.

• If you intend to purchase a vacation home or an investment property, then a conventional loan is better suited to your needs.

The Loan Amount Is Larger Than The FHA Loan Limit Amount

• If you intend to purchase a large, luxurious, or expansive property and the loan amount is too high, once again, a conventional loan may be better for your situation.

You Have Enough Money To Make A Large Down Payment

• One small downside of obtaining an FHA loan is that you are required to pay for MIP (Mortgage Insurance Premium), this amount is equivalent to 1.75% of the loan amount upfront as a closing cost, and 0.80% annually.
• If your down payment will be large enough you may wish to consider a conventional loan that may offer a lower MIP rate or one that has no mortgage insurance requirement whatsoever.

Refinancing And Taking Out Cash From The Equity

• If your home value has increased significantly since you bought it and you want to unlock some of your equity by refinancing and taking cash out, this can potentially be done with an FHA loan.
• Please note though, the total loan amount can not be more than 80% of the home’s value when taking cash out during a refinance. Coincidentally the State of Texas also has a limit of 80% when taking cash out with a conventional loan refinance.

Conclusion

If you’ve chosen Texas as your new home, an FHA loan can be a great option when trying to find the right mortgage for you. Speak with one of our Loan Officers here at OVM today, and begin your journey to finding your dream home!