Are you ready to buy a house in Houston? Have you found the perfect mortgage yet? If you are already perplexed with your low credit scores, put your faith in FHA loans. This seems to be the perfect choice for first-time homebuyers. There are no lender’s fees, and you need not worry about your low credit scores, either. On top of it, you can apply for a 3.5% down payment! You cannot find such enticing features if your target was a conventional loan.
Now, proper preparation requires looking at different things. Start the loan application process by finding a lender. Every FHA-approved lender usually follows the HUD’s guidelines; some of them bring changes to the eligibility requirements. The major portion does not really change, but you need to develop a basic idea of the mortgage guidelines. So, if you are looking at this loan program, it is essential to gather information on the FHA loan requirements Texas. The more you familiarize the loan with yourself, the better you can understand how it works. So, let’s have a look at the fundamental requirements of an FHA loan in Texas.
Prepare for FHA mortgage insurance
The main reason behind choosing an FHA loan is the low credit score requirements and down payments. You can choose a 3.5% down payment with credit scores as low as 580. But for this option, you need to prepare for a mortgage insurance premium. Typically, borrowers need to pay an upfront mortgage insurance premium around 1.75%. Apart from this, the mortgage program also asks for ongoing mortgage insurance. At closing, you can pay the upfront mortgage insurance premium. The annual premium depends on the mortgage amount.
Front-end and back-end ratio for FHA loans
Before you set out for purchasing a home, take a long look at your front-end ratio. The front-end ratio comprises property taxes, home insurance, HOA fees, and mortgage insurance. Make sure the ratio remains less than 31% of the total earning. You can get approval if you have 46.99%. However, the borrower still needs to submit a justification for the higher debt ratio. On the other hand, you have to review your back-end ratio which includes student loans, credit card payments, and monthly debt payments. If you want to get approved, make sure the debt does not go over 43%.
FHA loan limits are important to know
Another important thing that every borrower must remember is the property standard. Your property must meet the standard and go under an appraisal. Also, find out the maximum loan limits in your state. In various counties, the maximum size can be up to $331,200 along with a 3.5% down payment. The loan limit is a little bit higher for conventional loans.
Find an FHA-approved lender before you decide which loan program suits you. Go over your options, and figure out what is the ideal option. Discuss with your lender and do your homework. Don’t forget to gather full information on the FHA requirements before signing the papers.