FHA Loans in Texas: Your Complete 2026 Guide
FHA loans make homeownership accessible with just 3.5% down and 580 credit score requirements. Learn about FHA loan benefits, requirements, and how they work in Texas.
What Are FHA Loans?
FHA loans are mortgages insured by the Federal Housing Administration. This government backing allows lenders to offer more flexible qualifying requirements, making homeownership accessible to borrowers with lower credit scores or limited savings.
FHA loans have been helping Americans become homeowners since 1934. They are especially popular among first-time buyers, though repeat buyers can also use FHA financing.
Key Benefits
- As low as 3.5% down payment
- 580 minimum credit score
- Gift funds accepted for down payment and closing costs
- More flexible debt-to-income ratios
- Assumable mortgages
- Seller can contribute up to 6% toward closing costs
FHA Loan Requirements in Texas
Credit Score Requirements
- 580 credit score for 3.5% down payment
- 500-579 credit score requires 10% down payment
- Recent bankruptcy: 2 years waiting period
- Recent foreclosure: 3 years waiting period
- Payment history more important than score alone
Down Payment and Closing Costs
- 3.5% minimum down with 580+ credit score
- 10% down required for 500-579 credit scores
- 100% of down payment can be gift funds
- Down payment assistance programs accepted
- Seller can pay up to 6% toward closing costs
Debt-to-Income Ratios
- 43% maximum DTI typical
- Up to 50% DTI possible with compensating factors
- Higher DTI allowed with strong credit and reserves
- Manual underwriting for higher ratios
Employment and Income
- 2 years employment history preferred
- Stable income required
- Self-employed need 2 years tax returns
- Part-time and bonus income allowed with 2-year history
- Non-taxable income grossed up by 25%
FHA Mortgage Insurance
FHA loans require two types of mortgage insurance to protect lenders:
Upfront Mortgage Insurance Premium (UFMIP)
- 1.75% of base loan amount
- Can be rolled into loan (no out-of-pocket cost)
- Example: $5,250 on $300,000 loan
- One-time fee paid at closing
Annual Mortgage Insurance Premium (MIP)
- 0.55% annually for most loans over $726,200
- 0.50% annually for loans under $726,200 with 5%+ down
- 0.55% annually for loans under $726,200 with less than 5% down
- Paid monthly as part of mortgage payment
- Required for life of loan with less than 10% down
- Can be removed after 11 years with 10%+ down payment
While MIP adds to monthly costs, it makes FHA loans accessible to borrowers who might not qualify for conventional financing.
FHA Loan Limits in Texas 2026
FHA loan limits vary by county. Most Texas counties fall under the standard limit:
2026 FHA Loan Limits
- Most Texas counties: $498,257
- High-cost areas: Up to $726,200
- Harris County (Houston): $498,257
- Dallas County: $498,257
- Travis County (Austin): $498,257
- Bexar County (San Antonio): $498,257
These limits are adjusted annually based on home price changes. Check with your lender for specific limits in your county.
FHA Property Requirements
FHA loans can only be used for primary residences that meet minimum property standards:
- Property must be safe, sound, and secure
- All systems (electrical, plumbing, HVAC) must be functional
- No peeling paint in homes built before 1978
- Roof must be in good condition with 2+ years remaining life
- Foundation must be structurally sound
- Property must have safe access and egress
- Must meet local building codes
FHA appraisers are more thorough than conventional appraisers. Sellers may need to complete repairs before closing if issues are identified.
FHA vs Conventional Loans
| Feature | FHA | Conventional |
|---|---|---|
| Minimum Credit Score | 580 (500 with 10% down) | 620 |
| Minimum Down Payment | 3.5% | 3% |
| Upfront MI Premium | 1.75% of loan | None |
| Monthly MI/PMI | Life of loan (low down) | Removable at 20% equity |
| Seller Concessions | Up to 6% | Up to 3-9% (varies) |
| Property Standards | Stricter requirements | Standard appraisal |
| Best For | Lower credit, small down payment | Good credit, larger down payment |
Who Should Consider FHA Loans?
FHA loans are ideal for:
Great For:
- First-time homebuyers
- Credit scores 580-680
- Limited savings for down payment
- Using gift funds or DPA
- Higher debt-to-income ratios
- Recent credit issues (2-3 years past)
Consider Alternatives If:
- Credit score over 680
- Can put 20% down
- Want to avoid lifetime MIP
- Buying expensive property near loan limits
- Property needs significant repairs
Frequently Asked Questions
What credit score do I need for an FHA loan in Texas?
You need a 580 credit score for 3.5% down. Scores between 500-579 require 10% down. Most lenders prefer 580+ for best approval chances.
Can I use gift funds for my FHA down payment?
Yes. 100% of your FHA down payment can come from gift funds from family members. You need a gift letter and documentation of the transfer.
How long does FHA mortgage insurance last?
With less than 10% down, MIP lasts for the life of the loan. With 10%+ down, MIP can be removed after 11 years. The only way to remove MIP early is to refinance to conventional once you have 20% equity.
Can I buy a fixer-upper with an FHA loan?
Standard FHA loans require properties to meet minimum property standards. For fixer-uppers, consider an FHA 203(k) renovation loan that allows you to finance both purchase and repairs in one loan.
Ready to Apply for an FHA Loan?
Ken Harmon specializes in FHA financing throughout Texas. With flexible qualifying and low down payment options, FHA loans make homeownership accessible.
Get pre-approved today and see if FHA is right for you.