FHA loans give Texas buyers a low down payment and flexible credit, but the details decide whether one actually fits your situation. The sections below cover current loan limits, credit and down payment rules, mortgage insurance, and the state programs that can cover most of your cash to close.
Every borrower situation is different, and the question I always come back to is the same one: how do we get you into a home that you can actually keep? An FHA loan answers that question for a lot of Texas buyers, because it lowers two of the biggest hurdles at once. It lets you buy with a small down payment, and it judges your credit more gently than a conventional loan does.
Here's the part that surprises people. The Federal Housing Administration doesn't lend you the money. It insures the loan that an approved lender makes, which means the agency reimburses the lender if the loan defaults. That backstop is what lets a lender say yes to a buyer with a 600 credit score or three and a half percent in the bank, when a conventional file might come back as a no. You pay for that insurance, and we'll get to exactly what it costs, but the trade is real: easier approval in exchange for an ongoing premium.
Texas makes this an especially good fit. The statewide median sale price recently came in around $328,000, well under the national median, and most of the state sits comfortably under the FHA limit. So the program isn't some narrow tool for a handful of buyers. In a lot of Texas markets, an FHA loan reaches almost any home a first-time home buyer is realistically shopping for. When I sit down with a buyer at AmeriSave, the first thing we do is figure out whether the FHA path or a conventional path leaves them better off, and we do it with their actual numbers, not a rule of thumb.
I want to set one expectation upfront. An FHA loan isn't automatically the cheapest loan. For a buyer with strong credit and a real down payment, conventional financing often wins over the long run because the mortgage insurance behaves differently. For a buyer with a 540 score and limited savings, FHA might be the only door that opens. Both can be the right answer. The honest answer depends on your file, and that's the whole point of working the numbers before you fall in love with a house.
The rest of this article moves in the order a real purchase moves. First the loan limits, so you know what the program will insure. Then the two numbers that set your path, your credit score and your down payment. Then mortgage insurance, which is the cost most buyers don't see coming. After that, the income and property rules, the Texas assistance programs that can carry most of your cash to close, and finally the step-by-step process from preapproval to the closing table.
An FHA loan limit is the largest loan the agency will insure in a given county. It isn't a promise that you qualify for that amount, and it's not a target to aim for. It's a cap. Your approval still rides on your income, your debts, your credit, and your down payment. The limit just tells you whether FHA is even an option for the price range you're shopping.
The number that matters for most of Texas is the floor. For a one-unit home, the FHA floor is $541,287. That floor is set as a percentage of the conforming loan limit that the Federal Housing Finance Agency publishes for loans backed by Fannie Mae and Freddie Mac. The conforming baseline rose to $832,750, the FHA floor is 65% of that figure, and the FHA ceiling for the highest-cost markets in the country is 150% of it, which works out to $1,249,125 for a one-unit home.
In Texas, the vast majority of the state's 254 counties sit at that floor. The entire Houston metro, El Paso, the Panhandle, the Rio Grande Valley, East Texas, and essentially all of rural Texas use the $541,287 figure for a single-family home. A limited number of higher-priced metro counties carry a larger limit. Parts of the Dallas-Fort Worth and Austin metros run above the floor, and the single highest one-unit limit in the state sits north of $800,000 in a small, high-value county out in the Permian Basin. The exact figure for your county is published in the federal mortgage-limits lookup, and an AmeriSave loan officer can confirm it for the specific county you're buying in before you write an offer.
If you're buying a two-unit, three-unit, or four-unit property and living in one of the units, the limits climb. For most Texas counties at the floor, a two-unit limit is $693,050, a three-unit is $837,700, and a four-unit is $1,041,125. That matters more than people think, because an owner-occupied duplex or fourplex bought with an FHA loan is one of the few ways a first-time buyer can let tenants help cover the mortgage. We’ll come back to that under loan types.
I get a version of this conversation almost every week. A buyer hears that the limit in their county is over half a million dollars and assumes that means they can borrow that much. The limit and your budget are two completely different things. Plenty of buyers who could be approved up to the limit have no business borrowing anywhere near it, because the payment would swallow their paycheck. Start from the monthly payment you can carry without stress, including taxes and insurance, and work backward to a price. The limit only enters the picture if the home you want pushes past it, and at that point conventional or jumbo financing becomes the conversation instead.
The loan limit tells you what FHA will insure. Affordability is a completely different question, and it's the one that actually keeps you in the home. A lender doesn't approve you on the price of the house. It approves you on the monthly payment you can carry, and that payment is bigger than most buyers picture, because it's not just principal and interest. Your real number is the full payment, principal, interest, property taxes, homeowners insurance, and the FHA mortgage insurance premium, all rolled together into one monthly figure.
Two ratios frame the approval. The first is your housing payment against your gross monthly income, and FHA likes to see that land somewhere around 31%. The second adds your other monthly debts, the car payment, the student loans, the credit card minimums, and that one usually carries the most weight, often landing near 43% with room to stretch on a strong file. So a buyer pulling in $6,000 a month before taxes is frequently comfortable somewhere near an $1,860 housing payment, with total monthly debts staying under roughly $2,580. Those aren't hard walls, but they're the shape of the box the underwriter is working inside.
The right way to find your number is to build it from the payment up, not from the price down. Start with the monthly payment you can carry without losing sleep, fold in the Texas property tax slice and the insurance, and work backward to a price. On a typical Texas purchase, that full payment runs meaningfully higher than the principal-and-interest figure a quick online calculator shows you, which is exactly why two homes listed at the same price can cost very different amounts to own once the local tax rate and insurance are in. Build around the full payment and the house you land on is one you keep.
Leave yourself a cushion, too. A buyer who stretches to the very top of what the ratios allow has no room when the air conditioning dies in August or the property tax bill jumps. An AmeriSave loan officer can build a real affordability number with your actual income, debts, and the tax rate in your county, instead of the rough guess a calculator hands you, so you shop with a price you can defend.
FHA sorts buyers into two lanes based on credit score, and which lane you land in decides your minimum down payment. With a credit score of 580 or higher, your minimum down payment is 3.5% of the purchase price. With a score from 500 to 579, the minimum jumps to 10%. Below 500, FHA financing is off the table.
On paper that 500 floor sounds generous, and technically it is. In practice, very few lenders write FHA loans down at 500 to 579, and the ones who do attach tighter conditions. Most lenders set an internal minimum, often at 580, 620, or 640, that sits above the agency's official floor. Those internal minimums are called overlays, and they're why two lenders can quote you different answers on the same file. So when you read that FHA goes down to 500, read it as the agency's outer boundary, not as the score most lenders will actually approve.
One more thing about scores. The credit score a mortgage lender pulls usually runs lower than the score you see on a free consumer app, because mortgage lenders use older scoring models and take a middle score across three bureaus. I've watched buyers walk in certain they have a 680 because that's what their phone showed them, only to see a 640 on the mortgage pull. Don't build your plan around the app number. Get a real preapproval and find out what the lender actually sees.
Let me put real numbers to it, because this is how I teach it at the kitchen table. Take a $340,000 home, which is right around the Texas median, with a 620 credit score. Your minimum down payment is 3.5%, or $11,900. That leaves a base loan amount of $328,100. The home price is far below the $541,287 floor, so FHA is wide open here. Your cash to close is that $11,900 plus closing costs, and as you'll see in the next two sections, Texas assistance programs can shrink the down payment piece dramatically.
Now change one number. Same $340,000 home, but a 540 credit score. FHA still allows it, but the minimum down payment is now 10%, or $34,000, and the base loan drops to $306,000. That's a big swing in cash, and it's the clearest argument I can make for spending a few months lifting your score above 580 before you shop. Moving from the 10% lane to the 3.5% lane on this purchase frees up about $22,100 in cash. For most buyers, that gap is the difference between buying this year and buying in two years.
FHA is unusually flexible about the source of your down payment, and this is one of the program's most useful features for buyers who have income but thin savings. Your entire down payment can come from a gift, as long as it comes from an eligible donor such as a family member and is properly documented. A documented gift isn't a loan and doesn't have to be repaid, but it does need a paper trail: a gift letter, and a record of the funds moving. When a parent or relative is helping, AmeriSave will walk you through exactly how to document it so it doesn't snag in underwriting. Down payment assistance programs, which we cover further down, can also supply some or all of the down payment.
If your score is sitting close to a threshold, a little prep work pays off more than almost anything else you can do before you buy. It helps to know what a credit score is actually built from. The biggest pieces are your payment history, how much of your available credit you're using, the age of your accounts, the mix of credit types you carry, and how many new accounts and hard inquiries you've opened recently. Of those, the fastest lever for most buyers is the amount of credit you're using, what lenders call your utilization.
Bringing your card balances down under about 30% of each card's limit, and lower if you can manage it, can move a score in a single billing cycle, because that ratio updates fast. That's very different from the slow grind of building payment history, and it's why a buyer who's a few points short can sometimes get where they need to be in a month or two just by paying balances down. Don't close the cards once you pay them off, though. Closing an account shrinks your available credit and can quietly push your utilization the wrong way.
Pull your own credit reports first and read them line by line. You’re entitled to free reports, and errors turn up more often than people expect. A late payment that was not yours, an account you already closed showing as open, or a balance that's flat wrong can all drag a score down, and disputing those mistakes costs nothing. Fix the errors before you apply, not in the middle of underwriting when the clock is running on your contract.
Most credit work that matters happens over a few months, not a few days, so the time to start is before you're house hunting, not after you find the one. Because crossing 580 unlocks the 3.5% down payment lane, a buyer sitting at 560 or 570 often gets more value from a couple of months of focused credit work than from any other single move. Talk to an AmeriSave loan officer before you start shifting money around, because the smartest step depends on exactly what's on your report, and a good loan officer reads those reports all day.
If I had to name the single most common what-is-this moment a borrower brings me, it's mortgage insurance on an FHA loan. People understand the down payment and the interest rate. Then they see two extra charges they were not expecting, and the questions start. So let me lay it out plainly, because once you understand it, the rest of the FHA cost picture makes sense.
FHA charges two separate premiums. The first is the upfront mortgage insurance premium, which is 1.75% of your base loan amount, paid at closing or, far more commonly, financed into the loan so it's not out of pocket. The second is the annual mortgage insurance premium, which for most buyers runs 0.55% of the loan amount per year. You don't write a yearly check for it. It's divided by twelve and added to your monthly payment, sitting right alongside principal, interest, taxes, and insurance.
That 0.55% figure is worth pausing on, because it used to be a lot higher. A recent federal reduction cut the annual premium for most borrowers from 0.85% down to 0.55%, the largest cut in over a decade. For a buyer putting down 10% or more, the annual premium is a touch lower at 0.50%. Those rates are set by the agency and don't change based on your credit score, which is a genuine advantage for buyers in the 580 to 620 range, who would often pay more for private mortgage insurance on a conventional loan.
Back to that $340,000 home with 3.5% down and a base loan of $328,100. The upfront premium of 1.75% comes to $5,742, which most buyers roll into the loan rather than pay at the table. The annual premium of 0.55% works out to about $1,805 a year, which is roughly $150 a month added to your payment. So on this purchase, mortgage insurance is costing you about $150 every month on top of your principal and interest. That's real money, and it deserves a place in your budget before you fall for a house at the top of your range.
This is the rule that costs people the most, and almost nobody knows it going in. If you put down less than 10%, which is the whole point of the 3.5% option, the annual premium stays on the loan for the entire life of the loan. It doesn't fall off when you reach 20% equity the way private mortgage insurance does on a conventional loan. The only ways to get rid of it are to refinance into a conventional loan once you have the equity and credit, or to pay the loan off.
If you put down 10% or more, the rule is friendlier. The annual premium drops off automatically after 11 years. So a buyer who can stretch to a 10% down payment is buying their way out of mortgage insurance at year 11 instead of carrying it for three decades. On a loan around $300,000, ending that premium at year 11 instead of paying it for the remaining years can avoid roughly $30,000 over the life of the loan. That isn't a reason to drain your savings to hit 10%, but it's a reason to run both versions before you decide.
Here's the practical play many Texas buyers run, and it's a perfectly good one. You buy now with FHA and 3.5% down, because that's what gets you into the home while prices and rates are where they are. Then, once your home has appreciated and you've built equity past 20%, you refinance into a conventional loan and drop the mortgage insurance entirely. With normal appreciation, a lot of buyers reach that point in a handful of years. The phrase I use with borrowers is simple: get in now, refinance later. Just make sure the loan you start with is one you can carry comfortably in the meantime, because there's never a guarantee on exactly when rates or values will cooperate.
After your credit and down payment, the next thing underwriting weighs is your debt-to-income ratio, which is the slice of your gross monthly income that goes toward debt. Underwriters look at two versions. The front-end ratio is just your future housing payment against your income, and lenders like to see that land somewhere around 31%. The back-end ratio adds in your other monthly debts, the car payment, the student loans, the minimum on the credit cards, and that one carries more weight.
FHA is more forgiving here than most buyers expect. A back-end ratio around 43% is comfortable, but with strong compensating factors such as cash reserves, a long stable job history, or a meaningful chunk of money left over after the down payment, FHA files can be approved well into the 50s. The exact ceiling isn't a single hard number, because it flexes with the rest of your file. When AmeriSave runs your loan through automated underwriting, the system reads the whole picture at once and tells us how much room you actually have, rather than us guessing from a rule of thumb.
On the income side, the guideline most buyers run into is a two-year history. Underwriters want to see a steady track record, usually two years in the same line of work, though gaps for school or a documented move between jobs in the same field are usually fine. Self-employment, commission, and bonus income all count, but they get averaged over a longer window and documented more heavily, so if you're self-employed, expect to hand over two years of returns. None of this should scare you off. It's just the homework, and the sooner you gather it, the smoother the file moves.
Here's something I tell every buyer worried about their debts. Don't pay off and close every credit card the month before you apply, hoping it helps. Sometimes it does, and sometimes closing your oldest account quietly drops your score at the worst possible moment. Talk to a loan officer before you make big moves on your credit in the run-up to buying. The goal is to make decisions with the actual numbers in front of you, not to guess and hope.
An FHA loan doesn't just judge you. It judges the house. Because the agency is insuring the loan, it wants the property to be safe, sound, and worth the money, so an FHA appraisal does two jobs at once. It estimates the home's value, the same as any appraisal, and it checks the home against the agency's minimum property requirements for safety and structural soundness. Peeling lead-based paint on an older home, a roof at the end of its life, missing handrails, or major systems that don't work can all stop the loan until they're fixed.
Buyers sometimes hear all that and assume the FHA appraisal replaces a home inspection. It doesn't, and treating it that way is a mistake I've watched cost people dearly. The appraisal protects the lender's collateral. A home inspection, which you pay for separately and is entirely optional from the lender's point of view, protects you, the buyer, by telling you what's actually wrong with the house before you own it. Get your own inspection. Your AmeriSave loan officer will tell you the same thing, because a surprise after closing is the most expensive surprise there is.
One more property rule that catches people: an FHA loan is for a primary residence. You have to intend to live in the home, you're generally expected to move in within 60 days of closing, and you're expected to keep it as your main home for at least the first year. You can't use a standard FHA loan to buy a pure investment property or a vacation place. The one wrinkle, and it's a useful one, is that a two-to-four-unit building counts as owner-occupied as long as you live in one of the units, which is the door to the house-hacking strategy we get to under loan types.
Because the appraiser checks the home against the agency's minimum standards, a handful of issues come up again and again on Texas houses, and knowing them ahead of time saves a lot of heartbreak. Foundation movement sits near the top of the list, because much of the state rests on expansive clay soils that swell and shrink with the weather, and a lot of metros see it. Visible cracking, doors that won't close, or floors that slope can trigger a request for a structural engineer's report before the loan moves forward. Roofs are the second big one, since hail is a fact of life across Texas, and a roof near the end of its life can hold up a loan until it's repaired or replaced. After that come peeling paint on older homes built before the late seventies, which raises a lead-based paint concern, missing handrails or broken windows, and major systems that simply don't work. Out in rural counties on a private well or septic system, the appraisal adds checks on the water supply and the waste system. Termites and other wood-destroying insects show up in the humid eastern and Gulf-coast parts of the state, so a separate pest inspection is common there. None of this means an older or rural home can't get an FHA loan. It means you walk in with your eyes open and budget for the repairs the appraisal is likely to call for.
This is the part of the conversation that changes the math for a lot of Texas buyers, and it's the part that gets skipped most often because people assume they earn too much to qualify. Read that again, because it's usually wrong. The income limits on Texas assistance programs are higher than most buyers expect, and the programs pair cleanly with FHA financing.
Texas runs its home buyer help through two statewide agencies. The Texas Department of Housing and Community Affairs offers My First Texas Home for first-time home buyers, with exceptions for veterans and for buyers in certain targeted areas, and My Choice Texas Home, which drops the first-time requirement so repeat buyers can use it too. Both pair a 30-year fixed loan at a set program rate with down payment and closing-cost assistance worth up to 5% of the loan amount, structured as a second lien. The same agency also runs the Texas Mortgage Credit Certificate, which gives you a dollar-for-dollar federal tax credit on a portion of the mortgage interest you pay every year, for as long as you keep the loan and live in the home.
The second agency, the Texas State Affordable Housing Corporation, runs two more programs. Homes for Texas Heroes is built for teachers, police officers, firefighters, emergency medical services workers, corrections officers, veterans, and active-duty military, and Home Sweet Texas is open more broadly. Both offer assistance worth up to 5% of the loan amount, delivered as either a grant you never repay or a zero-interest second lien, and both pair with FHA loans. AmeriSave works with FHA borrowers using these programs, and a loan officer can tell you which one fits your profile and your county.
Every one of these programs sets income and purchase-price limits that vary by county and household size, and most ask for a minimum credit score in the low 600s and completion of a short home buyer education course before closing. Because the exact numbers shift, the right move is to have a participating lender check your specific county against the current guidelines rather than rule yourself out based on something you read once.
Let me show you what this does to the cash you need. Go back to the $340,000 home with a base loan of $328,100. The FHA minimum down payment is $11,900. Now layer on 5% assistance against that loan amount, which is about $16,405. That assistance more than covers the entire $11,900 down payment, with money left over to help with closing costs. This is exactly why so many buyers are stunned to learn they need far less cash to buy than they assumed. The assistance is a second lien or a grant with its own rules, so it's not free in every sense, but for a buyer staring at a savings account that won't stretch to a down payment, it's often the bridge that gets them to the closing table this year instead of someday.
The tax credit is the piece buyers overlook most, and it's worth real money every year you own the home. A Mortgage Credit Certificate lets you take a set percentage of the mortgage interest you pay each year as a dollar-for-dollar federal income tax credit, not just a deduction. That distinction matters more than it sounds. A deduction only lowers the income you're taxed on, while a credit lowers the tax bill itself, which puts far more money back in your pocket. On a loan in the low three hundreds, that yearly credit can be worth somewhere from the high hundreds into the low thousands of dollars, for as long as you keep the loan and live in the home, and you claim it when you file your federal return. There's one wrinkle to know about. If you sell the home within the first nine years and your income has climbed past a certain point, a federal recapture tax can claw back part of the benefit, though in practice it touches only a small slice of buyers. A loan officer who works with these programs can tell you whether the certificate is worth pairing with your loan.
The down payment help itself shows up in two forms, and it's worth knowing which one you're being offered. Some programs hand you a grant you never repay. Others give you a second lien, a small second loan that sits behind your main mortgage, often at zero interest, that's either forgiven after you live in the home for a set number of years or repaid when you sell or refinance. Neither version is truly free in every sense, because a forgivable second lien ties you to the home for a while, and a repayable one comes back around when you sell. But for a buyer who clearly earns enough to carry a mortgage and just can't pull together the lump sum, that structure is the bridge that gets them to the closing table years sooner. Read the terms, ask straight out which type you're getting, and make sure the strings attached actually fit how long you plan to stay.
Most people picture one FHA loan, the standard purchase loan, and that one does cover the majority of buyers. It's the program with the 3.5% down payment and the credit flexibility we've been describing. But there are a few other FHA products that solve specific problems, and knowing they exist can save you from forcing the wrong tool onto your situation.
An FHA renovation loan lets you finance the purchase of a home and the cost of fixing it up in a single loan, based on what the home will be worth after the work is done. For a buyer eyeing a dated house in a good Texas neighborhood, or a home that would not pass the standard appraisal in its current shape, this is the difference between walking away and writing an offer. It comes with more paperwork and a required contractor process, so it's not the fast path, but for the right house it's the only path that works.
If you already have an FHA loan and rates drop, the FHA Streamline refinance lets you refinance into a lower rate with reduced documentation and, in many cases, no new appraisal. It's one of the simplest refinances in the business because the agency already insures your loan. This is worth a calendar reminder for current FHA borrowers: when rates ease, check whether it pencils out, because the savings can be meaningful for very little hassle.
This is my favorite move for a motivated first-time home buyer who wants tenants helping pay the mortgage. Because FHA treats a two-to-four-unit building as owner-occupied when you live in one unit, you can buy a duplex, triplex, or fourplex with the same low down payment, and the higher multi-unit loan limits give you room to do it. You live in one unit and rent the others, and a portion of that projected rent can even help you qualify. It's more work than buying a single-family home, and you become a landlord on day one, but for the right buyer in the right Texas market, it's one of the fastest ways to build equity. AmeriSave's FHA options include these multi-unit purchases, and a loan officer can model how the rental income affects your approval.
This is where the situational thinking really matters, because the honest answer is that it depends on your file, and anyone who gives you a blanket rule is selling you something. Let me teach it the way I teach it. Maybe an FHA loan doesn't make sense for me, because I've got good credit and a real down payment, and a conventional loan would let me cancel mortgage insurance once I hit 20% equity. But for a buyer with a 560 score and 3.5% down, an FHA loan is exactly right, because it's the door that actually opens. Same neighborhood, same price, completely different answer, because the buyers are different.
The clearest difference is in the mortgage insurance. On a conventional loan, private mortgage insurance is priced partly on your credit score, so a lower score costs you more, and it cancels once you reach 20 to 22% equity. On an FHA loan, the premium is the same regardless of your score, which helps weaker-credit borrowers, but with the minimum down payment it stays for the life of the loan unless you refinance. So a strong-credit buyer with some money down often comes out cheaper on conventional over time, while a thinner-credit, lower-down-payment buyer often qualifies more easily, and more cheaply at the start, on FHA.
There's no trophy for picking the program that sounds best. The right loan is the one that solves your problem, and the only way to know is to put both side by side with your actual numbers. An AmeriSave loan officer can price an FHA scenario and a conventional scenario on the same purchase and show you the monthly payment, the cash to close, and the long-run cost of each, so you're choosing with the math in front of you instead of a gut feeling.
An FHA loan doesn't have to be the loan you keep forever, and for a lot of Texas buyers the smartest plan is to start with FHA and move off it once their situation improves. There are a few ways out, and which one fits depends on where your equity, your credit, and rates sit when you're ready to make the move.
The big one is the conventional refinance, and it's the cleanest way to escape mortgage insurance for good. Once your home has appreciated and your balance has come down enough that you hold around 20% equity, and your credit has improved along the way, you can refinance the FHA loan into a conventional loan and drop the FHA mortgage insurance entirely. On the example loan we've been using, walking away from that roughly $150 a month is real, lasting savings. For a buyer who started at the minimum down payment and watched Texas home values climb, that exit can arrive in a handful of years rather than three decades, which is the whole logic behind getting in now and refinancing later.
If you simply want a lower rate and you're content to stay with FHA, the simplified FHA-to-FHA refinance covered earlier is the low-friction route, with reduced paperwork and, in many cases, no new appraisal. And if you have built real equity and need cash for something like a renovation, an FHA cash-out refinance lets you borrow against that equity up to a limit the agency sets, currently capped so your new loan doesn't exceed 80% of the home's value. That cap exists to keep you from pulling out every dollar of equity at once and leaving yourself exposed.
The honest guidance here's the same as everywhere else in this article. Don't refinance because the calendar flipped. Refinance because the math works. A refinance carries its own closing costs, so the monthly savings have to outrun those costs within a reasonable window for the move to be worth making. When you're wondering whether the timing is right, an AmeriSave loan officer can run the break-even for you and tell you, in plain numbers, whether refinancing today actually puts money back in your pocket or just resets the clock.
Texas buyers get a genuine break in one place and a genuine cost in another, and both land in your monthly mortgage payment through the escrow account. The break is that Texas has no state income tax. The cost is that Texas property taxes run higher than the national average, because the state leans on property tax to fund a lot of what other states fund with income tax. Your loan officer collects a slice of those taxes every month, holds it in escrow, and pays the bill when it comes due, which means your real monthly payment is principal, interest, taxes, and insurance, not just principal and interest.
There's relief built into the system. The residence homestead exemption lowers the taxable value of the home you actually live in, which reduces the property tax bill on your primary residence. It's one of the first things a new Texas owner should file for, because it directly shrinks the tax piece of your payment. The rules and amounts are set at the state and local level, so the exact savings depend on where you buy, but the exemption is real money and a lot of new owners forget to claim it.
Insurance is the other escrow line that surprises people, especially in parts of the state exposed to wind and hail, where premiums run higher. Add it all up and you can see why I keep saying the loan limit isn't your budget. Two homes at the same price can carry very different monthly payments once you fold in the local tax rate and the insurance, and the payment is what you actually live with. Always build your budget around the full payment, taxes and insurance included, before you decide how much house you can carry.
The down payment is the number everyone fixates on, but closing costs are the second pile of cash you need to bring, and they catch buyers off guard more than anything else in the deal. Closing costs are the fees to originate and finalize the loan, and on a Texas purchase they typically run somewhere around 2 to 5% of the price. They cover the lender's origination charge, the appraisal, title insurance and the title work, recording fees, and the prepaid items the lender collects upfront, like the first slice of property taxes and the homeowners insurance that go into your escrow account at closing.
Here's the rule that changes the math, and it's one of the most useful features in the whole FHA program. A seller, builder, or other interested party is allowed to contribute up to 6% of the sales price toward your closing costs and prepaid items. That's a large concession. In a market where a seller is motivated to close, asking for a few percent in seller-paid closing costs can shrink the cash you need almost as much as a down payment assistance program does. It doesn't touch your down payment, but it can wipe out most or all of the closing costs, which is often the piece that was standing between a buyer and the closing table.
Lender credits are the other lever worth knowing. You can frequently accept a slightly higher interest rate in exchange for a credit that covers part of your closing costs, which trades a little more in monthly payment for a lot less cash today. Whether that trade is smart depends on how long you plan to keep the loan, because over enough years the higher rate can cost more than the credit saved you. It's exactly the trade-off to model with a loan officer before you commit, rather than guessing.
Put it all together on that $340,000 home. Your 3.5% down payment is $11,900. Closing costs at, say, 3% would be roughly $10,200, which on its own would push your total cash to close up around $22,100. Now negotiate 3% in seller-paid costs into the contract, and that $10,200 largely disappears, leaving you closer to just the $11,900 down payment. Layer a Texas assistance program on top of that, and a buyer who walked in convinced they needed twenty-some thousand dollars in the bank can sometimes reach closing with a fraction of it. This is why the cash-to-close conversation, not just the down payment, is one of the first things an AmeriSave loan officer will walk through with you, because the down payment alone never tells the whole story.
People fear the mortgage process mostly because it feels like a black box. It's not. It's a sequence, and when you know the order, the whole thing gets a lot less stressful. Here's how a Texas FHA purchase actually moves.
It starts with a real preapproval, not a guess. A loan officer verifies your income and your credit and tells you the price range you're actually approved for, which is very different from the number a calculator spits out. AmeriSave's Certified Approval is built for this moment, because it shows a seller that your financing is verified and that you're a serious buyer, which carries real weight when you're competing for a home. Skipping this step is the single most common reason buyers lose the house they want.
From there, you shop inside your approved range, you find the home, and you write the offer. Once it's accepted, your full application goes in, the lender orders the FHA appraisal, and underwriting begins working through your file. You’ll almost always get a list of conditions, which is just underwriting asking for a few more documents or a clarification. This is normal. The borrowers who close fastest are the ones who answer those requests the same day instead of letting them sit. After the conditions clear, you get your closing disclosure, you do a final walkthrough, and you sign at the closing table. Start to finish, a typical FHA purchase closes in about 30 to 45 days, though the timeline stretches if the appraisal turns up repairs or if documents come in slowly.
Throughout all of it, the loan estimate the lender gives you lays out your expected costs. Those figures are good-faith estimates, and some of them can change if your situation changes, for example if the appraisal comes in differently than expected or you change your loan terms. So read it, ask about anything you don't understand, and lean on your AmeriSave team to explain each line rather than assuming a number is locked when it's still an estimate. The whole goal is to reach closing with no surprises, and that happens when every question gets answered upfront.
After enough years of working with buyers, the same handful of avoidable mistakes show up again and again. None of them are about being smart or not smart. They are about not knowing what you did not know, so here they are, written down, so you can skip them.
The first is treating the loan limit as a budget. We've covered this, but it bears repeating, because the limit tells you what FHA will insure, not what you can afford. Build your number from the payment up, not from the limit down.
The second is borrowing your neighbor's situation. Probably the most common thing I hear that I gently push back on is a buyer telling me their neighbor or their cousin got a certain loan, so they want the same one. The trouble is your neighbor makes more or less than you, has more or less equity, and carries a different credit profile, so you can't shop with your neighbor's bank account. The loan that fit them might be the wrong loan for you, and the only way to know is to work your own file.
The third is skipping the assistance programs because you assume you earn too much. The income limits are higher than people think, and leaving 5% of your loan amount on the table is an expensive assumption to make without checking. The fourth isn't budgeting for mortgage insurance, then feeling blindsided by an extra 150 dollars a month. And the fifth is draining every dollar of savings to push the down payment higher, leaving nothing in reserve for the first broken water heater. A small down payment with a cushion in the bank often beats a bigger down payment and an empty account. When in doubt, talk to your AmeriSave loan officer and run the trade-off before you move the money.
An FHA loan is a strong tool for a lot of Texas buyers, but it's a tool, not a destination. The low down payment and the flexible credit open the door, the mortgage insurance is the price of that flexibility, and the Texas assistance programs can carry much of the cash you would otherwise have to save for years. Whether it beats a conventional loan for you comes down to your credit, your down payment, and how long you plan to keep the loan.
The way to get to the right answer is the same way I run it with every borrower. Start with your actual numbers, not a rule of thumb. Get a real preapproval so you know what you can carry, including taxes and insurance. Ask every question before you sign, because the questions you ask upfront are the surprises you avoid at closing. If you want a second set of eyes on the math, an AmeriSave loan officer can price your FHA and conventional options side by side and tell you which one leaves you better off. We have a saying around here, and it sums up the whole approach: it's called AmeriSave because we save Americans money, which means the right loan is whatever is genuinely best for your situation, not ours.
Jerrie leads sales operations in the Dallas-Fort Worth region for AmeriSave, where his entire mortgage career has been spent since being recruited into the industry at age 18. Licensed as a Mortgage Loan Originator in 37 states, he specializes in making complicated loan options accessible and helping borrowers understand what matters most in their individual situations. He brings deep regulatory knowledge and a client-centric approach honed through progression from entry-level to upper management, including successfully onboarding and training 70 people from a closed Cleveland office.
In most Texas counties, the FHA floor for a one-unit home is $541,287. A limited number of higher-priced metro counties carry larger limits, and the highest one-unit limit in the state sits above $800,000 in a small high-value county. The national ceiling for the most expensive markets in the country is $1,249,125. Because each county is set against its own median home prices, confirm the exact figure for your county with the federal mortgage-limits lookup before you write an offer.
The agency allows scores as low as 500, but in practice the number that matters is 580. A score of 580 or higher qualifies you for the 3.5% minimum down payment, while a score from 500 to 579 requires 10% down. Many lenders also set their own internal minimum above the agency floor, often at 620 or 640, so the practical answer for most buyers is 580 and up. The score a mortgage lender pulls often runs lower than the one on a free credit app.
The minimum is 3.5% of the purchase price for buyers with a 580 or higher credit score. On a $340,000 home, that's $11,900. Buyers with scores from 500 to 579 put down 10%. Your entire down payment can come from a documented gift from an eligible donor, and Texas assistance programs can supply up to 5% of the loan amount, which on a typical purchase can cover the full down payment with help left over for closing costs.
Usually, yes, if you make the minimum down payment. With less than 10% down, the annual mortgage insurance premium stays for the entire life of the loan, and the common way to remove it's to refinance into conventional loan once you have enough equity. If you put down 10% or more, the annual premium drops off automatically after 11 years. There's also a one-time upfront premium of 1.75% of the loan, which most buyers finance into the balance.
Yes. The Texas Department of Housing and Community Affairs and the Texas State Affordable Housing Corporation both run programs that pair with FHA financing and offer up to 5% of the loan amount in assistance, delivered as a grant or a second lien. Most programs require a credit score in the low 600s, set income and purchase-price limits that vary by county, and ask you to complete a short home buyer education course before closing.
Yes, and it's one of the program's most useful features. Your entire down payment can come from a gift, provided it comes from an eligible donor such as a family member and is properly documented with a gift letter and a record of the funds moving. A documented gift isn't a loan and doesn't have to be repaid. Your loan officer will show you exactly how to paper it so it doesn't create a problem in underwriting.
The biggest differences are credit flexibility and how mortgage insurance behaves. FHA accepts lower credit scores and smaller down payments, and its insurance premium is the same regardless of your score, but with the minimum down payment that premium lasts the life of the loan. Conventional loans usually want stronger credit, and their private mortgage insurance is priced on your score but cancels once you reach about 20% equity. Strong-credit buyers with some money down often save more on conventional, while thinner-credit buyers often qualify more easily on FHA.
Yes, as long as you live in one of the units as your primary residence. FHA treats a two-to-four-unit building as owner-occupied in that case, so you keep the low down payment, and the program publishes higher loan limits for multi-unit properties, such as $693,050 for a two-unit and $1,041,125 for a four-unit in most Texas counties. A portion of the projected rent from the other units can even help you qualify.
Most FHA purchases close in about 30 to 45 days. The timeline depends on how quickly the appraisal is completed, whether it turns up any required repairs, and how fast you return the documents underwriting asks for. Buyers who answer condition requests the same day tend to close at the faster end of that range. Getting a verified preapproval before you shop also keeps the process moving once your offer is accepted.
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