The Lone Star State is booming, driving demand for homes. However, it can feel impossible to achieve your dream of homeownership due to the high costs. Thankfully, there is an option: FHA loans.
FHA loans are government-backed loans that assist homeowners with lower credit scores, offering them favorable interest rates and low upfront costs. Because they are safer for lenders, they are more accessible than conventional loan products.
However, these loans come with lower loan limits than those set by the Federal Housing Finance Agency (FHFA) for conventional loans, making it important for borrowers to understand Texas FHA loan limits before they apply. Today, we’ll explain how to qualify for an FHA loan based on the maximum loan amount in your area.
Benefits of FHA Loans for Texas Homebuyers
The Federal Housing Administration, a segment of the Department of Housing and Urban Development, backs certain mortgage loans so lenders are more willing to work with borrowers with less-than-perfect credit. Because the government reimburses lenders if the borrower defaults, they may also extend more advantageous interest rates.
Texas FHA loans come with numerous benefits for borrowers, including lower minimum credit score requirements than conventional mortgages. You can qualify for an FHA loan with as low as a 500 credit score, though you must pay a higher down payment than those with better credit.
Down payments are also lower with FHA loans. If you have a 580 credit score or higher, you can pay only 3.5% of the purchase price as a down payment. Those with credit scores between 500 and 579 must provide 10% of the sales price as a down payment. Instead of paying private mortgage insurance, you will pay an upfront mortgage insurance premium (UMIP) and annual mortgage insurance premium (MIP), which is often more affordable.
While an FHA home loan can be used for investment properties with up to four units, one of those units must be used as a primary residence.
2024 FHA Loan Limits Texas
Texas FHA loan limits are set at the county level to ensure those in high-cost areas can still afford their dream home. These amounts are lower than conforming loan limits set by the FHFA, designed to make family homes affordable in any county.
Throughout the country, the loan limit for a single-family home in most areas is $498,257. However, high-cost counties have higher limits.
In most Texas counties, the limit is $498,257 for one unit, $637,950 for two units, $771,125 for three units, and $958,350 for four units.
Areas with higher loan limits are typically in metropolitan areas and include the following counties in Texas:
One-Family Unit | Two-Family Unit | Three-Family Unit | Four-Family Unit | |
Bandera County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Bastrop County | $571,550 | $731,700 | $884,450 | $1,099,150 |
Bexar County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Caldwell County | $571,550 | $731,700 | $884,450 | $1,099,150 |
Collin County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Comal County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Dallas County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Denton County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Ellis County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Guadalupe County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Hays County | $571,550 | $731,700 | $884,450 | $1,099,150 |
Hunt County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Johnson County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Kaufman County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Kendall County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Medina County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Parker County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Rockwall County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Tarrant County | $563,500 | $721,400 | $872,000 | $1,083,650 |
Travis County | $571,550 | $731,700 | $884,450 | $1,099,150 |
Williamson County | $571,550 | $731,700 | $884,450 | $1,099,150 |
Wilson County | $557,750 | $714,000 | $863,100 | $1,072,600 |
Wise County | $563,500 | $721,400 | $872,000 | $1,083,650 |
How are FHA Loan Limits Determined?
FHA loan limits are determined by several metrics: average market values, income levels, cost of construction, and housing demand. Different units of housing, such as a single-family home versus a four-unit building, will have different limits.
These limits have a “floor” and a “ceiling” based on the average price of housing in the area. The floor is generally 65% of the conforming loan limit, while the ceiling is 150% of the national conventional loan limit. If the county’s prices fall between these, the FHA limit will be 115% of the median sales price in the area.
Certain areas, including Alaska, Guam, and the Virgin Islands, have much higher loan limits due to the limited construction in these areas and the high price of housing.
Factors That Affect How Much You Can Borrow with an FHA Loan
Like other loans, you will be approved for a certain amount of financing depending on your individual borrowing profile, but there are also limits to how much you can finance based on the FHA loan program itself.
How much you can borrow with a Texas FHA loan is dependent on two primary factors: the property location and the type of home you are purchasing.
Property Location
The Federal Housing Administration sets limits for each county. These limits are determined by average income, housing demand, cost of constructing a new home, and the market values in the given area.
In most cases, you can borrow up to $498,257, but there are numerous exceptions throughout Texas. Counties with higher limits tend to be near metropolitan areas, such as Fort Worth, Dallas, and Houston.
Type of Property
If you are purchasing a larger property with up to four units, you can qualify for more through an FHA loan. In most counties, you can borrow up to $958,350 for a four-plex, but this limit may be higher if you are in a more expensive area.
Who Qualifies for an FHA Loan in Texas?
FHA loans are meant to make homeownership affordable for a variety of borrowers, but there are some stipulations as to who can use these loans. There are three primary requirements to qualify for an FHA loan.
Down Payment
You will need to provide some cash upfront regardless of your credit history, but the minimum you can provide will depend on your creditworthiness.
If you have a credit score between 500 and 579, you must provide a 10% down payment. If your credit score is 580 or higher, you only need to provide 3.5% down.
Those who don’t have enough savings to cover these expenses can utilize gift funds or down payment assistance. However, you must document these funds with a gift letter from the donor, confirming that the gift does not need to be repaid.
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio is your monthly gross income divided by your monthly payments, such as for student loans or credit cards. DTI limits ensure that you have enough money to pay your mortgage each month, protecting both you and the lender from default.
The FHA recommends a DTI of no more than 43%, but some lenders will go up to 57%. You will prove this by showing tax returns, pay stubs, and lists of all your obligations.
Credit Score
You can have a credit score of as low as 500 to qualify for an FHA loan, but if you have less than 580, you will need to provide 10% down. Those with 580 scores or higher only need to provide 3.5% down.
You may also be subject to higher interest rates if you have a lower score. However, the requirements are much lower than what you would need for approval on a conventional loan. Because the government backs the loan, lenders are more willing to give you an advantageous interest rate.
You Need an Experienced Texas FHA Loan Lender
Arnaiz Mortgage is your expert for all things FHA loans. We’ll take the time to understand your specific needs and provide helpful advice along the way, ensuring you have everything you need to succeed with your mortgage. You’ll get competitive rates with the least hassle, helping you step into your brand-new home faster. Additionally, we can assist you with refinance options down the line. With Arnaiz Mortgage, you’ll always have dedicated support.
Contact us today to get started with your FHA loan in Texas!
FAQs
Can I Use an FHA Loan for a Multi-Family Property?
Yes, you can get an FHA loan in Texas for multi-family properties of up to four units. These properties allow for higher borrowing limits, though you will need to use at least one of the units as your primary residence.
What if I Need to Borrow More Than the FHA Loan Limit?
Your total loan needs to be within the FHA loan limit. This means that if you want a home that is more expensive than the country threshold, you will need to make up the difference with your down payment or through other loans or assistance programs.
Are There Any Closing Cost Assistance Programs for FHA Borrowers in Texas?
Yes, there are several Texas homeownership assistance programs available to help those who may not have the savings to afford their down payment.
One of the most popular options is run by the Texas Department of Housing & Community Affairs, which offers a 30-year fixed-rate mortgage option for first-time homebuyers. If you choose this option, you must have at least a 620 credit score and undergo a homeowners education course to ensure you’re ready for the rigors of homeownership.
Those who use this program can receive up to 5% of their purchase price toward a down payment, as well as closing cost assistance as a forgivable second lien on their home. If you remain in your home for three years without refinancing or selling the property, the loan will be forgiven, and you won’t need to make any payments during this period.
Additionally, some counties and cities offer assistance through their own homeownership incentive programs. Our loan officers at Arnaiz Mortgage can assist you in finding applicable programs in your area, making sure you never pay more upfront than necessary.