An FHA mortgage is a type of home loan that is backed by the Federal Housing Agency. First-time homebuyers in Houston can apply for an FHA loan to purchase a house that falls within the FHA loan limits in their area.
FHA mortgages differ from conventional mortgages because the requirements for borrowers to qualify are more lenient.
Here’s what you need to know about getting an FHA loan and using it to purchase a home in Houston.
Before you start researching lenders and scouring the internet for your dream home, it’s important to understand and meet the requirements to borrow an FHA loan.
You can get an FHA loan with a credit score as low as 500, but you’ll be required to put down ten percent. If you have a credit score of 580 or higher, you can put down as little as 3.5%.
To qualify for a loan from the Federal Housing Agency, you must have a debt-to-income ratio lower than 50%. While there is no minimum or maximum income requirement, you must have two credit accounts and show proof of any cash gifts that go towards your down payment.
It’s also important that you do not have any federal debt, unpaid taxes, or a remaining balance on another FHA loan.
While some areas in the country have different FHA loan limits, the typical borrowing limit for a single-family home in a low-cost area is $356,362. In high-cost areas, borrowers can take out a maximum of $822,375.
In Houston, the limits are uniform across all counties, but knowing the median home price in each county may help you determine which part of the city you’d like to buy a home in.
It’s important to understand that just because the limit is $356,362 doesn’t mean you have to borrow that entire amount.
FHA loans tend to have higher interest rates than conventional loans, so buyers should keep an eye out for deals and use savvy shopping tactics.
The Houston-Galveston region is comprised of thirteen counties. The FHA loan limits and the median cost for single-family homes in each county are listed below.
Austin County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Brazoria County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Chambers County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Colorado County
Minimum: $356,362
Median Sale Price: $173,000
Maximum: $822,375.00
Fort Bend County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Galveston County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Harris County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Liberty County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Matagorda County
Minimum: $356,362
Median Sale Price: $154,000
Maximum: $822,375.00
Montgomery County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Walker County
Minimum: $356,362
Median Sale Price: $139,000
Maximum: $822,375.00
Waller County
Minimum: $356,362
Median Sale Price: $290,000
Maximum: $822,375.00
Wharton County
Minimum: $356,362
Median Sale Price: $164,000
Maximum: $822,375.00
When you’re looking for an FHA lender, the number one rule is to shop around. Each lender has their own specific fees and requirements, so you should look at your options thoroughly before choosing to do business with one.
One of the key things to look at is the lender’s credit score requirement. While the Federal Housing Agency only requires you to have a 500-credit score, your lender may only work with borrowers who carry higher scores.
You must pay close attention to lender fees because they can add up quickly. Don’t be afraid to negotiate the fees. You should also look at the annual percentage rate when you are shopping for a lender.
Your lender will ask you to provide your social security number, pay stubs, tax returns, and some other forms of documentation that prove your identity, income, and assets.
When you are buying a house in Houston with an FHA mortgage, the property must meet the requirements set by the Federal Housing Agency.
The home must be used as a primary residence by the borrower within two months of closing, and you can’t use an FHA loan to purchase an investment home or flip property.
The home must pass an appraisal and meet the FHA standards. Once you settle, you must title the home in your name or in the name of a trust.