What Is an FHA Loan and Who Qualifies? (Texas Edition)

If you’ve been scrolling Zillow late at night and wondering how much you actually need to buy your first home — there’s a good chance you’ve seen the term “FHA loan.”

But what is an FHA loan, really?

And how do you know if it’s the right fit for you here in Texas?

Let’s break it down — simply, clearly, and without the jargon.

First things first: What is an FHA loan?

An FHA loan is a mortgage that’s insured by the Federal Housing Administration — a government agency that helps make homeownership more accessible, especially for first-time buyers or anyone without perfect credit.

Here’s the quick version: The FHA doesn’t lend you money — it insures the loan so your lender can offer better terms, lower down payments, and more flexible guidelines.

That’s why it’s so popular among first-time homebuyers across Texas. 

How much do you need for a down payment?

This is one of the biggest FHA advantages. You can put as little as 3.5% down, and those funds can even come from gift money or down payment assistance programs.

Example: On a $400,000 home in Montgomery, Texas your minimum down payment would be $14,000.

That’s a game-changer compared to conventional loans, which often require 5–10% down -- unless you’re a first time homebuyer. More to come on that later.

Who qualifies for an FHA loan in Texas?

Here’s what lenders (like me!) typically look for:

• Credit score: Minimum of 580 for the 3.5% down option (scores between 500–579 may still qualify with a higher down payment requirement).

• Debt-to-income ratio (DTI): Usually below 57%, though exceptions can apply.

• Employment history: At least two years of consistent income.

• Property type: The home must be your primary residence (not an investment or vacation property).

• Loan limits: As of 2025, most Texas counties allow FHA loans up to $524,225 for a single-family home — but check your county’s exact limit.
  

What kinds of homes qualify for FHA financing?

FHA loans can be used for:

• Single-family homes

• Some townhomes and condos (if FHA-approved)

• Manufactured homes (that meet HUD standards)
  

But there’s a catch: the property must pass an FHA appraisal, which looks closely at safety, habitability, and condition. That means fixer-uppers might need repairs before you can close.

FHA vs. Conventional: Which one’s better?

Here’s the quick comparison:

	FHA Loan	Conventional Loan
Down Payment	3.5% (can be gifted)	3–5% minimum
Credit Flexibility	More lenient	Stricter credit standards
Mortgage Insurance	Required for the life of the loan (unless you refinance)	Can be removed once you reach 20% equity
Appraisal Requirements	Stricter	More flexible
Best For	First-time or moderate-income buyers	Buyers with higher credit and larger down payments

My take: FHA is often the best “bridge” loan — it gets you into your home now, then you can always refinance into a conventional loan later once your equity or credit improves.

Texas-specific FHA insights

• Property taxes here can vary dramatically by county, which affects your monthly payment.

• Home insurance rates are slightly higher than the national average, so FHA’s lower down payment can help offset cash out of pocket.

• Many cities (like Houston and Conroe) have local down payment assistance programs that pair beautifully with FHA.
  

What to watch for (the fine print)

FHA loans aren’t perfect — here are a few things to keep in mind:

• You’ll pay Mortgage Insurance Premiums (MIP): a small monthly fee plus an upfront premium at closing.

• The loan must meet FHA appraisal standards, which can be tougher for older homes.

• Mortgage Insurance  usually stays for the life of the loan — unless you refinance into a conventional loan later.
  

But for many buyers, those trade-offs are well worth it for the flexibility, security, and opportunity FHA brings.

The bottom line

FHA loans were designed to help more families buy homes — and they still do exactly that today.

Whether your credit isn’t perfect, you’re short on down payment funds, or you just want to start building wealth through real estate, this is one of the most forgiving, accessible programs out there.

The best next step? Let’s review your numbers and see whether FHA or conventional makes more sense for your goals

Ready to explore your FHA options?

Book a quick strategy call and let’s find out if FHA is your best fit — or if another loan could save you even more.

👉 [Schedule your consult →] Schedule with Megan Bludau 

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