If you’re planning to buy a home in Texas but worry about your credit score, savings, or past financial setbacks, an FHA loan might be the perfect solution. Backed by the Federal Housing Administration, these loans are built to help people with moderate incomes and less-than-perfect credit finally become homeowners. In this guide, we’ll break down why FHA loans are a smart move for Texans—and how to qualify.
What Is an FHA Loan?
An FHA loan is a type of government-backed mortgage insured by the Federal Housing Administration, which operates under the U.S. Department of Housing and Urban Development. FHA loans are made by FHA-approved lenders and are particularly sought after by first-time homebuyers but are available for repeat homebuyers as well.
Unlike conventional loans, FHA loans have lenient conditions, and are therefore appropriate for those who cannot qualify for the more stringent terms of the usual mortgage programs.
Top Benefits of an FHA Loan in Texas
1. Low Down Payment – As Low as 3.5%
Saving for a large down payment can be a huge barrier for buyers. FHA loans require only 3.5% down if your credit score is at least 580. Even with a credit score between 500–579, you may still qualify with a 10% down payment.
2. Easier Credit Qualification
FHA loans are designed for low credit score borrowers. They require only a 580 credit score in 2025 for the lowest down payment category. There are lenders that approve loans for borrowers with credit scores as low as 500 under specific conditions.
3. Higher Debt-to-Income (DTI) Ratios Allowed
Texas FHA lenders are more flexible, allowing a debt-to-income (DTI) ratio of up to 57%, compared to the 45–50% cap on most conventional loans. That makes it easier for borrowers who already have things like student loans or car payments.
4. No Minimum Income Requirement
There’s no official minimum income required. You just need to show a stable income over the past two years, with documentation such as tax returns, pay stubs, or W-2s (Wage and Tax Statement).
5. Flexible Sources for Down Payment
Your down payment funds may come from your personal savings, down payment assistance programs, or from financial gifts from family members or friends. Just keep in mind: financial gifts over $19,000 for an individual ($38,000 for a couple) could be taxable to the donor in 2025.
Texas-Specific Down Payment Assistance Programs
Texas offers several down payment assistance programs for first-time and repeat homebuyers:
- Texas Homebuyer Program: Offers up to 5% of your first mortgage amount in assistance, usable for down payment or closing costs.
- Pathway to Homeownership: Through New American Funding, eligible buyers may receive up to $6,000 in assistance.
- Local Programs: Many cities and counties in Texas offer their own DPAs—check with your local housing office or HUD for details.
FHA Loan Property Options in Texas
FHA loans in Texas can be used for a wide range of property types, including:
- Single-family homes
- 2–4 unit properties (duplex, triplex, fourplex)
- Condos and townhomes
- Manufactured homes
- Fixer-uppers (with FHA 203(k) loans)
The property must be your primary residence—FHA loans are not for vacation homes or rentals.
FHA 203(k) Loans: Buy & Renovate in One
Want to buy a fixer-upper? FHA 203(k) loans roll the purchase price and renovation costs into a single loan. Two types are available:
- Limited 203(k) – Up to $35,000 in repairs (no structural changes)
- Standard 203(k) – Includes major renovations, accessibility upgrades, or structural repairs
Great for buyers looking to build equity or customize their homes.
FHA Streamline Refinance: Lower Your Rate
Already have an FHA loan? The FHA Streamline Refinance can help you lower your interest rate without:
- A new appraisal
- Income verification
- Employment checks
- Credit review
It’s a fast, easy way to lock in better terms when rates drop.
Mortgage Insurance: What You Need to Know
All FHA loans require Mortgage Insurance Premiums (MIP):
- Upfront MIP: 1.75% of the loan amount, paid at closing or rolled into the loan.
- Annual MIP: Paid monthly as part of your mortgage payment.
MIP is required for the life of the loan if your down payment is below 10%. If you put down 10% or more, you may be eligible to remove MIP after 11 years.
FHA Loan Requirements in Texas (2025)
To qualify, you’ll generally need:
- Credit score of 580+ for 3.5% down (or 500–579 for 10% down)
- Verifiable, consistent income for the past 2 years
- Primary residence (not a rental or investment)
- DTI ratio under 57% (most lenders prefer ≤43%)
- Home inspection that meets FHA standards
- Mortgage insurance Premiums (MIP)
- Down payment of 3.5%–10%, depending on your credit score
FHA Loan Limits in Texas
Loan limits vary by county and are adjusted annually. In 2025:
- Most Texas counties: $524,225 for single-family homes
- High-cost areas (e.g., Austin, Dallas, San Antonio): Up to $571,550
- 4-unit properties: Up to $1,099,150
Check your specific county’s limit on the HUD or FHA websites.
How to Apply for an FHA Loan in Texas
Follow these steps:
- Check your credit score and start improving it if needed
- Set your budget with an online FHA mortgage calculator
- Gather documents: tax returns, W-2s, bank statements, ID, debt info
- Research DPA programs in your area
- Contact an FHA-approved lender like New American Funding
FHA loans are the most flexible and affordable mortgages available to Texas homebuyers—especially first-time homebuyers and those with low credit scores. With low down payment requirements, relaxed DTI limits, and access to state-sponsored assistance programs, an FHA loan in Texas may be your ticket to homeownership.
