FHA Loans in Austin, Texas
The go-to mortgage for first-time homebuyers. Just 3.5% down, credit scores from 580, and flexible qualification guidelines designed to help you buy your first Austin home.
What Is an FHA Loan?
An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. Created to make homeownership accessible to more Americans, FHA loans feature lower down payment requirements, more flexible credit guidelines, and competitive interest rates. They are one of the most popular loan programs for first-time homebuyers in Austin.
Because the government insures the loan against default, lenders can offer more favorable terms to borrowers who might not qualify for a conventional loan. This makes FHA financing particularly valuable in Austin's competitive housing market, where getting into a home quickly can mean the difference between winning and losing an offer.
Who Should Consider an FHA Loan?
FHA loans are ideal if you are a first-time buyer with limited savings, have a credit score between 580-619 (below conventional minimums), are recovering from a past credit event like bankruptcy or foreclosure, or want to use gift funds for your entire down payment. If you have excellent credit (720+) and 5% or more to put down, a conventional loan may offer better terms.
FHA Loan Benefits
3.5% Down Payment
On a $400,000 Austin home, that is just $14,000 down. Compare that to 20% ($80,000) for a conventional loan without PMI. Gift funds can cover the entire down payment.
Credit Scores from 580
FHA accepts credit scores as low as 580 for the 3.5% down option. Scores of 500-579 can qualify with 10% down. This opens doors for buyers still building their credit.
Flexible Debt Ratios
FHA allows debt-to-income ratios up to 50% with compensating factors, compared to 45% for most conventional programs. More of your income can go toward your mortgage payment.
Seller Concessions up to 6%
Sellers can contribute up to 6% of the purchase price toward your closing costs, compared to 3% on conventional loans. This can save thousands at closing.
Assumable Loans
FHA loans are assumable, meaning a future buyer could take over your mortgage at your locked-in rate. In a rising-rate environment, this can be a major selling advantage.
Down Payment Assistance Compatible
FHA loans work with Texas DPA programs like TDHCA and local Austin-Travis County assistance, potentially covering your entire down payment and closing costs.
FHA Loan Requirements in Austin
Credit & Income
Minimum 580 credit score for 3.5% down; 500-579 requires 10% down. Two years of steady employment history is standard. FHA is forgiving of past credit events: you may qualify just 2 years after a bankruptcy and 3 years after a foreclosure.
Property Requirements
The property must be your primary residence (no investment or vacation homes). It must meet FHA minimum property standards, which means the home needs to be safe, sound, and secure. The appraiser checks for health and safety issues like peeling paint, broken handrails, and structural problems.
FHA Mortgage Insurance (MIP)
FHA loans require mortgage insurance regardless of down payment amount:
- Upfront MIP: 1.75% of the loan amount, typically financed into the loan
- Annual MIP: 0.55% for most borrowers, paid monthly (about $183/month on a $400,000 loan)
- MIP remains for the life of the loan on most FHA mortgages
- You can refinance into a conventional loan to remove MIP once you reach 20% equity
2025 FHA Loan Limits for Austin
The FHA loan limit for Travis County is $524,225 for a single-family home. For multi-unit properties: $671,200 (duplex), $811,275 (triplex), and $1,008,300 (fourplex). If you need more than the FHA limit, consider a conventional or jumbo loan.
FHA Loan FAQ
FHA loans require a minimum credit score of 580 for the 3.5% down payment option. Borrowers with scores between 500-579 may qualify with a 10% down payment. FHA is one of the most credit-flexible loan programs available.
FHA loans require an upfront premium of 1.75% of the loan amount (financeable) and an annual premium of 0.55% for most borrowers, paid monthly. For a $400,000 loan, that is about $183/month. This insurance stays for the life of the loan in most cases, but you can refinance to a conventional loan later to remove it.
Yes. FHA allows 100% of your down payment to come from gift funds from family members, employers, or approved down payment assistance programs. A gift letter documenting the source and confirming no repayment is expected is required.
The 2025 FHA loan limit for Travis County (Austin) is $524,225 for a single-family home. Multi-unit limits are higher: $671,200 (duplex), $811,275 (triplex), and $1,008,300 (fourplex).
No. While FHA loans are popular with first-time buyers, repeat buyers can also use FHA financing. The main requirement is that the property must be your primary residence. FHA does not allow investment property or vacation home financing.
Explore Other Loan Programs
Helpful articles: First-Time Buyer's Guide · Improve Your Credit Score · Down Payment Assistance
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