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FHA Mortgage Loans in Texas

Looking for a home loan in Texas? Whether you’re a first-time home buyer or an experienced homeowner, an FHA loan is a great option for financing your home. And when it comes to finding the best Texas FHA mortgage loan terms, there’s no better place to start than LBC Mortgage. Our team specializes in FHA loans, and our customers’ best mortgage journey experience is our number one goal.

What Does The FHA Loan Mean?

The Federal Housing Administration (FHA) was created in 1934 to encourage homeownership in the United States. At that time, most people rented their homes and few had the savings for a down payment or the income necessary to qualify for a traditional mortgage. The FHA provided loans with low down payments and flexible terms so that more people could become homeowners. Since its inception, the FHA has helped millions of Americans buy their first home.

Today, the FHA continues to be a vital source of financing for first-time homebuyers and those with limited resources. The FHA insures mortgages, protecting lenders from losses if borrowers default on their loans. It allows lenders to provide loans with more flexible terms, making it easier for more people to become homeowners.

How Does an FHA Loan Work in Texas

FHA loans are government-insured mortgages that offer some of the best financing options with lower interest rates compared to conventional loans. FHA loans allow smaller down payments (as low as 3.5%), making them a great solution for first-time homebuyers.

These programs are available for purchase and refinance transactions, and they are the best fit for everyone who does not have much funds for a down payment.

Texas FHA Loan Requirements

If you’re considering an FHA loan in Texas  for your next home purchase, here’s what you need to know before applying for it:

Credit score
It is important to meet the minimum credit score requirements. If your credit score is at least 580, you can borrow up to 96.5% of the home value. In this case, the down payment is only 3.5%. The minimum credit score for an FHA loan is 500, but you’ll need a 10% down payment if your score is below 580.

You will need to pay private mortgage insurance (PMI) on your loan. However, if you have a credit score of 580 or higher, your PMI premium will be reduced. For all other borrowers, the PMI premium will be 1.75% of the loan amount. For example, if you borrow $150,000 for your mortgage, your MIP upfront payment would be $2,625.

Down payment assistance
The FHA offers down payment assistance grants to homebuyers who need help with the down payment. These grants are available to families with low incomes, and they do not have to be repaid. The down payment can also come from savings or a financial gift from a family member.

Foreclosure terms
Most lenders require at least two or three years to have passed since the bankruptcy or foreclosure before they will consider approving a loan. However, if borrowers can demonstrate that they have taken concrete steps to improve their financial situation, lenders may be willing to consider a shorter waiting period.

Employment history
A steady employment history is required to qualify for an FHA loan. You’ll need to show such documents as tax returns, a current year-to-date balance sheet, and a profit-and-loss statement.

Income requirements
For an FHA loan, your front-end ratio should be less than 31% of your gross income. This means that your mortgage payment (including PITI – Principal, Interest, Taxes, and Insurance) shouldn’t take up more than 31% of your monthly income. Additionally, your back-end ratio – which includes all of your other monthly debts in addition to your mortgage payment – should be less than 43% of your gross income.

Property standards
According to the U.S. Department of Housing and Urban Development (HUD), the FHA program requires the properties to meet the following minimum standards:

  • The property should be free from any hazardous conditions which would affect the health and safety of the occupants;
  • If the property is located in a Special Flood Hazard Area, it must have flood insurance;
  • If there are lead-based paint hazards, they must be disclosed to and addressed by the borrower;
  • The property must be free of any illegal use of controlled substances.

Texas FHA Loan Pros and Cons

FHA loans are popular among first-time homebuyers in Texas and those with little money saved for a down payment. Here are some pros and cons to consider before applying for an FHA loan.

FHA loan pros in Texas:

  • Low down payment – 3.5%.
  • More flexible credit requirements compared to other loans, making them easier to qualify for.
  • Purchase and refinance are allowed.
  • Lower interest rates, making them more affordable.
  • You can get an FHA loan even if you have declared bankruptcy in the past.

FHA loan cons in Texas:

  • Mortgage insurance is required, which can add extra costs.
  • Limitations to the property type
  • A home appraisal is required
  • It can take longer to close on an FHA loan compared to other types of loans

Work with a leading FHA mortgage broker in Texas

An FHA loan can be a great option for first-time homebuyers or borrowers with limited credit history, but it’s important to compare rates and terms from multiple lenders before you commit. That’s where LBC Mortgage comes in. We work with a network of lenders to get you the best possible rate on your FHA loan.

Our team makes the process fast and easy, and we’ll work with you every step of the way. So if you’re thinking about taking out an FHA loan in Texas, let us help you find the best possible rate.

Contact LBC Mortgage today to learn about the Texas FHA loans and get started on the process.

Frequently Asked Questions About FHA Mortgage

  • 1. What does an FHA loan stand for?

    An FHA loan is a home loan that is insured by the Federal Housing Administration. This type of loan is often used by first-time home buyers or people with less-than-perfect credit. Because the FHA provides insurance on the loan, lenders are more willing to approve borrowers who might not otherwise qualify.

  • 2. How to qualify for an FHA loan?

    To qualify for an FHA loan, borrowers must have a steady employment history, a good credit score, and a down payment of at least 3.5%. Additionally, borrowers must be able to show that they can afford the monthly mortgage payments. If you think you might qualify for an FHA loan, the best first step is to talk to a lender who can help you review your options.

  • 3. How to get rid of FHA mortgage insurance?

    FHA mortgage insurance is required for all FHA loans. The insurance protects lenders from borrowers who default on their loans. However, it also requires borrowers to pay a premium, which can add to the cost of their loan. If you want to get rid of your FHA mortgage insurance, you’ll need to refinance to a conventional loan. You’ll need a credit score of 620 and 20% equity in your home to qualify. While this may seem like a high bar to clear, it’s actually easier than it sounds. There are several ways to improve your credit score, and there are many programs to help you come up with the down payment.

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