TEXAS FIVE STAR LENDER

FHA loans

The Federal Housing Administration (FHA) offer guaranteed loans to help borrowers with income limitations. While they do require borrowers to meet specific terms, these loans usually have lower down payment requirements and less restrictive qualifying guidelines. Consider checking with your Lender for complete details if you think you may qualify for this type of loan. Government-guaranteed loans can be either fixed-rate or adjustable rate.

FHA Loans:

The Federal Housing Administration (FHA) - part of HUD - insures the loan so your Lender can offer you a better deal.

• Low down payments

• Your down payment can be as low as 3.5% of the purchase price.
• Low closing costs
• Easy credit qualifying

Types of Properties 

• Available on 1-4 unit properties.
• Approved Condominiums
• Mobile homes and factory-built housing

Minimum Credit Score Requirement

Some lenders accept Credit scores as low as 500, but this is not normal. Credit Scores typically go as low as 580 for most programs and lenders.

• If your credit score is 580 or more, you can put as little as 3.5% down.
• If your credit score is between 500 and 579, you must put 10% down.

Types of FHA Loans

• FHA 203B Fixed Rate Mortgage (FHA 203B)
• Adjustable Rate Mortgage (ARM)
• FHA 203K includes Improvement. See FHA 203K page for more information.
• FHA Energy-Efficient Mortgage includes the costs of energy improvements
• Reverse Mortgage

How much is the Maximum FHA Loan Amount?

The County sets FHA loan limits annually, determined largely by the median home prices over the previous year. Also, this limit will be adjusted for high-cost areas.

For 2024, FHA maximum limits for a single-family loan in Texas for most counties and some high-cost counties are $498,250 and $1,149,807, respectively.

For homes that cost more than the limit, you'll have to come up with a larger down payment or other funding to make up the difference.

Below, you will find FHA loan limits for some North Texas Counties for 1, 2, 3, and 4 units.

For information on specific counties not listed below, contact us.

2024 FHA loan limits for Some of the North Texas Counties

Click Here For FHA loan limits by all Texas Counties for the Year 2024

FHA Loan Requirements

Occupancy. You must live in the home as your primary residence for at least 12 months after you purchase it with an FHA loan.

An FHA home appraisal. An FHA-approved home appraisal is required before you close to both determining your home's value and ensuring that it's safe and of reasonable quality.

Down Payment:

• A minimum 3.5% down payment. If you have a 580 credit score or higher, you can put as little as 3.5% down.
• A minimum 10% down payment. If you have a 500-579 credit score. A credit score below 500 is not eligible for the loan.

Debt-to-Income Ratio (DTI) <=43%. However, there are some lenders that can go up to 50%.

To determine what a DTI is and how it is calculated. Click Here.

What is a DTI, and how is it calculated?

The debt-to-income Ratio (DTI) is how much money you earn versus how much you spend monthly. It is calculated by dividing your monthly debts (expenses) by your gross monthly income before tax. 

For the purpose of calculating your DTI, include monthly payments for Credit Cards, Car Loans, student loans, and any other loans or obligations you pay every month. This does not include the housing expenses such as utilities, groceries, clothing, etc.

Add the expected monthly mortgage payment, including the Principal, Interest, Property tax, and hazard Insurance, known as PITI.

Add other monthly fees related to the mortgage, such as monthly Home Owner Association fee (if it exists) and monthly Mortgage insurance premium, etc.

For Credit card payments, only add up your minimum monthly payments (even if you pay extra).

For a Student loan, if you are not set on how much you have to pay every month, use 1% of the loan balance.

Example of calculating a DTI:

Let's say you are working 32 hours per week at an hourly rate of $45. Your current balance on your credit card is $1024, with a minimum payment of $40. No car payment, $40 HOA/month, and you are paying $2700 for monthly payments, which include PITI and MI. 

Your Monthly gross income = 32 hours/week*$45*4 weeks/month + 16 hours/3 days * $45 =$6,480 per month 

Your DTI will be ($2700+$40+$40)/$6480 = 42.90%, which is fine.

What is mortgage insurance, and how much is it?

Mortgage insurance. 

Mortgage insurance protects your Lender against losses if you cannot pay your mortgage. It's typically required on a conventional loan if you make less than a 20% down payment and is called private mortgage insurance (PMI). The "private" means private companies provide the insurance and are not insured by the government.

For a Conventional loan, when the loan balance reaches 78% or lower of the original purchase, the PMI is automatically canceled. However, if, due to appreciation or any time, the loan balance becomes 80% or lower of the house's current value, you could request to drop the MIP. It requires an appraisal to prove your point, and you pay the appraisal cost.

FHA Mortgage Insurances:

For FHA loans, two mortgage insurance premiums apply.

·         One is charged upfront at closing, known as the upfront mortgage insurance premium (UFMIP). This premium is 1.75% of the loan amount.

·         The other FHA mortgage insurance is called Mortgage Insurance Premium (MIP) for FHA loans. The annual mortgage insurance premium (MIP) ranges between 0.15% and 0.75% of your loan amount. Over the life of the loan, you'll pay it in 12 installments as part of your monthly bill. 

Currently, for FHA loans with less than 10% down (e.g., 3.5%), the MIP stays for the life of the loan, regardless of whether the loan value is below 80% of the purchase price or the house's current value.
However, some 2024 bills request to change that, and MIP be dropped when the loan balance is less than 80% of the original purchase or the house's current value. We have to wait to see what will happen.

If you make at least a 10% down payment when you buy your home with an FHA loan, the annual MIP will drop off automatically after 11 years.

FHA UFMIP

• FHA UFMIP premium is 1.75% of the loan amount. 

It is charged upfront once at closing, and typically, it is financed into your loan amount over the term of the loan but can be paid entirely in cash. Partial cash payments are not allowed.

• FHA UFMIP is required regardless of the loan amount, your down payment, or your credit score.
• FHA UFMIP is not refundable unless you replace your current FHA loan with a new FHA loan.

To determine what FHA Mortgage Insurance (MIP) is and how it is calculated. Click Here.

FHA MIP

The cost of FHA mortgage insurance varies based on:

·         Your loan-to-value (LTV) ratio. Lenders divide your loan amount by the value or price of your home to determine your LTV ratio. The more you borrow, the higher the LTV ratio.

·         The loan term. Your loan term is the length of time you choose to pay off the loan and is typically 15 or 30 years for FHA loans.

·         The loan amount. Each year, new FHA loan limits are set based on the direction of home prices in the prior year. For year 2024: 

·         The maximum for a single-family home in most parts of the country in 2024 is $472,030. Borrowers in higher-cost parts of the country may be eligible for higher loan amounts, up to a maximum of $1,089,300.

·         For 2024, FHA maximum limits for a single-family loan in Texas for most counties and some high-cost counties are $498,250 and $1,149,807, respectively.

·         The loan purpose. Current FHA borrowers may be eligible for lower MIP premiums if they qualify for an FHA streamline refinance. Otherwise, are MIP premiums for purchases and most refinance types the same? 

·         FHA MIP is required regardless of the loan amount, your down payment, or your credit score.

·         The MIP monthly premium is the same regardless of your credit score

·         The MIP is charged annually, divided by 12, and added to your monthly payment.

Table 1: FHA MIP for mortgage term of more than 15 years*

*Applies to all purchases and refinances except FHA streamlines, FHA refinance loans closed on or before May 31, 2009 and Hawaiian Home Lands loans.

 Table 2: FHA MIP for mortgage term of 15 years or less*

FHA MIP vs. PMI: What’s the difference?

FHA Maximum Seller's Concession

When a home seller or interested third party pays all or part of the buyer's cost of financing, the payments are commonly referred to as seller concessions.

For all FHA loans, the seller and other interested parties can contribute up to 6% of the lesser of the sales price or appraised value for purposes of calculating the maximum mortgage amount. Seller concessions could be used in sales price or toward closing costs, prepaid expenses, discount points, and other financing concessions. If the appraised home value is less than the purchase price, the seller may still contribute 6% of the appraised value.

Conventional mortgage lenders have capped seller concessions at 3 percent of the sales price on loans with loan-to-value ratios similar to FHA. Loans guaranteed by the Department of Veterans Affairs cap seller concession at 4 percent of the sales price.

Can you get an FHA loan twice or more?

FHA and VA loans limit borrowers to one primary residence: You can typically only have one FHA loan or VA loan at a time. Lenders will only approve you for a new FHA purchase loan if it's your primary residence. Unless you're relocating to another city or state to buy a new primary residence and are unable to sell your current home, you aren't likely to be able to have FHA or VA financing on more than one property at a time.

To see the list of situations that allow you to have more than one FHA loan at a time, click here.

Following is the list of situations that allow you to have more than one FHA loan at a time:

You can purchase multiple homes with FHA loans under the following circumstances:

• You're relocating for a new job opportunity. This is common if your new job takes you to a different state and you haven't been able to sell your current home.
• Your new home is more than 100 miles away from your current FHA-financed home. The FHA loan is meant for homeowners, not real estate investors. This rule helps discourage investors from buying multiple homes through an FHA lender and taking advantage of the low 3.5% down payment, compared to the 15% to 25% down payment required for investment property purchases.
• You need a bigger home for a growing family. You'll need to prove you have at least 25% equity to get a second loan for an increase in your family size. That could mean paying the mortgage balance down to 75% of your home's value or choosing a different loan type, like a conventional loan.
• You're getting a divorce, and your spouse is staying in the current home. If your divorce decree shows the home has been awarded to your spouse, the Lender may make an exception for you to get a new home with an FHA loan.
• You're cosigning an FHA loan. If you just want to cosign a new FHA loan without being a co-borrower, you can do that — you'll have to sign the mortgage note, but you won't have to take the title. If you already have an FHA loan and want to become a co-borrower on a new FHA loan, you may be required to make at least a 25% down payment.
• You were a co-borrower for someone else's FHA loan but want to buy your own home now. The only catch with this option is you'll have to qualify for your new loan with the other payment counted against you unless you can document that the payments were made by the person you cosigned with.
• You're buying a HUD real-estate-owned (REO) property. Unlike other home types, which require a buyer to also be an occupant, you can use an FHA loan to purchase a home that was foreclosed upon by the FHA.

2023 minimum mortgage requirement, Down Payment, and Credit Score by loan type

Below is a snapshot of the new loan limits, along with the basic mortgage requirements.