The FHA loan is a home loan program guaranteed by the Federal Housing Administration, as a means to address the need for affordable housing opportunities in the country.
With its low down payment rate and more relaxed qualification requirements, the FHA loan presents itself as a very attractive option to many aspiring homeowners in Texas.
FHA Loan Requirements for 2021
The FHA loan requirements in Texas are pretty much the same as everywhere else in the United States.
Applicants who wish to qualify for the loan must meet the following requirements:
- The credit score of at least 580.
- A debt-to-income ratio of 50% or less.
- 3.5% down payment if the credit score is 580 or higher.
The ideal front-end debt-to-income ratio for an FHA loan is 36%. This means that your proposed housing expense shall not exceed 36% of your gross monthly income. The band-end ratio may be 50%, meaning all your debt obligations, including your mortgage, must not eat up more than 50% of your gross monthly income. Some lenders, however, are more flexible regarding the debt-to-income ratio and may qualify up to a maximum DTI of 57%.
Credit Score and Down Payment
To qualify for the 3.5% FHA loan down payment rate, the borrower must have a credit score of at least 580.
FHA lenders may also grant a home loan to individuals with no credit scores as long as they can prove their capacity to pay. When the borrower’s credit history is not available through traditional credit reporting agencies, the mortgage company will use Group I or Group II credit references (rental payments, utility payments, medical bills payments, insurance payments, school tuition, etc.) to determine the borrower’s ability to repay the loan.
FHA Property Requirements
When purchasing a home through the FHA loan, the borrower must adhere to the following property standards and occupancy requirements:
- The property must pass the inspection and appraisal performed by an FHA-approved appraiser. This is a necessary measure to ensure that the house meets the safety and structural guidelines set by the HUD.
- The borrower must occupy the property as their primary residence. However, he or she may enlist the help of a non-occupying co-borrower to help raise the overall credit score and contribute to the monthly payment responsibilities, if needed.
FHA Loan Limits in Texas
No matter which type of FHA loan you’re seeking, there will be limits on the mortgage amount.
For most counties in Texas, the FHA loan limit is currently at $356,362 for a single-family home. However, you may qualify for a higher loan amount if you’re purchasing a property near a big city.
If you’re interested in applying for an FHA loan, it’s important to keep in mind that the FHA only insures the loan. At the end of the day, it’s the lender that makes the final decision whether to approve your application or not. To increase your chances of qualifying for an FHA with better terms, work on improving your credit score and DTI ratio.