Imagine purchasing a home in Dallas with a low down payment and competitive rates—even if your credit score isn’t perfect. With an FHA loan, you can make it happen.
What is an FHA Mortgage?
An FHA loan is a mortgage product which is insured by the Federal Housing Administration (FHA). The insurance which the FHA provides for this loan alleviates risk.
With an FHA mortgage, it does not matter as much to a lender if your credit score is a few points lower than it could be or your debt-to-income (DTI) ratio is a few percentage points higher than would be ideal. Because the lender has the assurance that the FHA is backing your mortgage, they are able to approve you more easily and offer you a more competitive loan than they would otherwise.
Benefits of FHA Mortgages in Texas
Homebuyers who qualify for FHA loans in Dallas or elsewhere in Texas can look forward to the following advantages:
- Among the most attractive features of FHA mortgages are their low down payment requirements, ranging down to just 3.5%.
- Homebuyers who are struggling to qualify for conventional financing may find that they are able to be approved for FHA financing instead.
- A cap on your closing costs prevents them from being exorbitant.
- As with other types of financing, you can decide whether you prefer a mortgage rate which is fixed or adjustable.
- While FHA mortgages are popular especially for first-time homebuyers, repeat homebuyers can use them too.
- You can do more than buy a home using an FHA mortgage. You also can obtain FHA financing for construction, upgrades, repairs or refinancing.
Eligibility for Texas FHA Loans
You will discover that qualify for an FHA mortgage is typically easier than qualifying for a conventional loan.
- You will need a minimum credit score of 500 to qualify for an FHA mortgage. With this credit score, you would need to put 10% down on a home. If your credit score is 580 or above, the down payment requirement drops to 3.5%.
- 56.9% is the maximum DTI ratio that qualifies for an FHA mortgage.
- Just like with other types of financing, you need to document that you have been steadily employed for two years at a minimum along one career track.
- You can only use an FHA mortgage to finance the purchase of a primary residence.
- Your credit alert interactive voice response system (CAIVRS) report needs to be clear.
- If there is a foreclosure or bankruptcy in your past, the waiting period which is required must have elapsed before you submit your application for an FHA mortgage.
- FHA mortgages require private mortgage insurance (PMI) payments every month. It is possible to refinance at a later date if you qualify for a conventional loan which does not require PMI.