The Federal Housing Administration Loans or FHA Loan Programs are basically designed to help low- and moderate-income families who don’t meet the conventional loan requirements. The federal government does not loan money to borrowers. Instead, it provides a protection against losses through mortgage insurance premium (MIP). With MIP present, the chances of mortgage lenders providing insured Texas FHA home loans are high. That comes with lower interest rates and looser standards to qualify.
Nowadays, FHA loans in Texas are more popular, especially with the first-time home buyers. In fact, there are mortgage borrowers eligible for conventional loan but still choose an FHA home loan.
Available to all Texas residents, FHA loan programs are especially beneficial to individuals who have less available cash. This loan program is one of the easiest types of loan to qualify for. In fact, FHA and HUD have a total of more than 34 million insured homes since 1934. That makes them the largest mortgage insurer in the world.
FHa loan offers several benefits to first-time home buyers as it requires only 3.5% down payment and offers lower credit qualifications. If you have a credit score of at least 580, you can still qualify for an FHA loan and borrow up to 96.5% of the home value. However, if your credit score falls between 500 and 579, you can either perform ways on how you can improve your credit score before applying or settle a 10% down payment.
People with low or bad credit, went through bankruptcy or have been foreclosed upon can still qualify for an FHA loan program in Texas.
An FHA borrower without bank credit report qualifies for Texas FHA loan too! In fact, FHA lenders in Texas are prohibited by the U.S Department of Housing and Urban Development (HUD) from disregarding FHA application based solely on the borrower’s lack of credit history.
This type of loan can be a huge advantage if you never had credit scores due to lack of borrowing or credit card usage in the past. Alternatively, the borrowers may use the payment histories on utility bills, car insurance bills, cell phone bills, and apartment rent to build non-traditional credit.
In FHA loan, your entire down payment for a home may come from a gift. It can be a gift from your parents or another family member, an employer, an approved charitable group, or a government homebuyer program. Keep in mind though that there is a process to follow for gifting and receiving funds.
Calculating your debt-to-income (DTI) ratio roots from two factors – debt payments and before-tax income. For example, if you are earning a monthly income of $5,000 and your total debt payment is $2,000, your DTI will be 40%.
As compared to other loan programs, FHA can be more lenient when it comes to this area.
Most of the conventional mortgage programs like those offered by Fannie Mae & Freddie Mac, only allow DTI ratios between 36% and 43%.
Down payments less than 25%, for instance, Fannie Mae lets you go to 43% DTI for FICOs of 700 or up. However, many are not granted with conventional loans given a high debt ratio.
According to the ICE Mortgage Technology, 2021 showed that the average DTI for closed conventional purchases was 35% compared to 44% for FHA loans.
FHA loan limits can be extended where home prices tend to be more expensive. This results to buyers financing their home using FHA even if the home prices increased in certain high-cost areas.
A conventional loan or jumbo loan helps in cases where your area’s FHA’s loan limits are too low for the type of property you’re buying.
Homeowners backed by the FHA loan in Texas have access to the FHA streamline refinance. An exclusive FHA program that offers one of the simplest, fastest, and most affordable ways to refinance.
FHA Streamline Refinancing requires no credit score checks and income variations, and home appraisals are completely waived. Additionally, homeowners who have mortgage pre-dating June 2009 can get access to reduced FHA mortgage insurance rates.
Traditional Mortgage – An FHA mortgage in Texas that finances a primary residence.
FHA 203(k) Improvement Loan – A loan type that factors the amount you borrowed into the cost of certain repairs and renovations. It works best for people who are open to purchase a fixer-upper and build equity into their house.
FHA Energy Efficient Mortgage – Works pretty similar like the FHA 203(k) improvement loan program. However, this loan type focuses on upgrades that can lower utility bills such as new insulation, solar, or wind energy systems.
Home Equity Conversion Mortgage – Senior citizens aged 62 and above can convert their home equity into cash while retaining its title. This reverse mortgage program makes it possible for homeowners to withdraw the funds monthly in a fixed amount, a line of credit, or a combination of both.
Section 245(a) Loan – This type of FHA loan program works best for borrowers expecting their incomes to increase. There are two mortgages that promise shorter loan terms – Graduated Payment Mortgage (GPM) and Growing Equity Mortgage (GEM). GPM comes with lower monthly payments that moderately increases over a period of time. On the other hand, GEM comes with a monthly increase over time according to a set schedule.
A property financed by an FHA loan program must be a principal residence and owner-occupied. That being said, you cannot apply for Texas FHA loan intended for an investment property or rental property.
Below are the property types allowed for FHA financing:
In addition, an appraisal from an FHA-approved appraiser together with the certain minimum standards for home will be required. In cases where the home does not meet the standards and the seller disapproves the required repairs, you must pay for the repairs at closing. The funds then will be held in escrow until the repairs have been made.
Check out the premium costs for FHA loans by visiting the U.S. Department of Housing and Urban Development.
Texas FHA Loan Programs are ideal for people who are in the path to homeownership but with limited cash saved for down payment or low to no credit scores. Even first-time home buyers see this mortgage loan program as the best option due to its low down payment required and easier credit standards.
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