FHA loans · Texas & Tennessee
FHA loans, explained like a neighbor would.
FHA is one of the most common ways people buy their first home, and it's a big part of what I do. Here's how it works, who it fits, and what to watch for on an FHA Loan Estimate.
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, part of HUD. Because the government insures the lender against loss, FHA guidelines are often more flexible on credit and down payment than many conventional loans. It's for homes you'll live in, and it's one of the most common first-time buyer loans.
FHA loans are made by approved lenders, not by the government itself. HUD sets the rules in its Single Family Housing Policy Handbook (4000.1). I work with these rules every day; FHA is a big part of what I do.
Who is FHA a good fit for?
FHA is often a good fit for first-time buyers, buyers rebuilding credit, and anyone with a smaller down payment. It can also help if your monthly debts are on the higher side compared to your income. If your credit is strong and you have more down, conventional may cost less over time, so it's worth comparing both.
- First-time homebuyers
- Credit that is good, not perfect
- Smaller savings for a down payment, including gift funds from family
- Buyers who want a small multi-unit home and plan to live in one unit
What about the down payment?
FHA is known for lower down payment options, and HUD sets the rules. What applies to you depends on your credit and the home, and the money can come from savings or an acceptable gift from family. Text me your situation and I'll walk you through what applies to you, or read HUD's own overview.
Source: HUD: Let FHA loans help you. Want to see a payment? Use the payment calculator with the rate you were quoted.
What is FHA mortgage insurance (MIP)?
FHA loans carry mortgage insurance premiums, called MIP. There's an upfront premium, usually added to the loan amount, and an annual premium paid monthly. How long the annual premium lasts depends on your down payment. MIP is what makes FHA's flexible guidelines possible, and it shows up on your Loan Estimate.
On your Loan Estimate, look for the upfront premium in Section B and the monthly amount under Projected Payments. If an FHA Loan Estimate shows no mortgage insurance at all, ask why.
What about credit for FHA?
FHA is designed to be flexible with credit that's good but not perfect, and lenders can add their own rules on top of HUD's. Your credit also affects what you'll need for a down payment. Because lender rules vary, a quick conversation is the fastest way to know where you stand. I'll tell you straight, and if you're not ready yet, I'll tell you what to work on.
FHA vs. conventional: which is cheaper?
It depends on your credit score and down payment. FHA is often more forgiving on credit, while conventional mortgage insurance can be cheaper and can be removed later for borrowers with strong credit. The honest way to know is to compare both Loan Estimates side by side, which I'm happy to do for you.
I have made TikToks about exactly this: borrowers with strong credit sometimes get put in FHA when conventional would cost less. The reverse happens too. Comparing both is the point.
What does FHA require for the home?
The home must be your primary residence and meet HUD's minimum property standards. An FHA appraiser checks value and basic safety, soundness, and security. That's not a full home inspection, so get your own inspection too. FHA can be used for single-family homes, approved condos, some manufactured homes, and small multi-unit properties you'll live in.
FHA in Texas and Tennessee
FHA works the same in both states, but local costs differ. In Texas, watch property taxes in your escrow estimate and remember there's no state transfer tax. In Tennessee, expect a transfer tax in Section E on a purchase; the mortgage tax applies to most loans, though some FHA deeds of trust may be exempt, so ask. Either way, your Loan Estimate should reflect the real property, not placeholders.
More: Texas home loans · Tennessee home loans · FHA basics (blog)
FHA loans are insured by HUD/FHA and require HUD-approved lenders. Guidelines can change. For illustration only. Not a commitment to lend, a Loan Estimate, or an offer of credit. Your actual figures depend on your full application, credit approval, property, and the loan program. John Stafford NMLS #2470539 | GoRascalJohn powered by GoRascal Inc. NMLS #2072896. Equal Housing Opportunity.
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Common questions
Can I use gift money for an FHA down payment?
Generally yes. FHA allows gifts from acceptable donors, like family, with a gift letter and documentation of the transfer. Ask before money moves so the paper trail is right.
Are FHA loans only for first-time buyers?
No. FHA is popular with first-time buyers, but repeat buyers can use FHA too, as long as the home will be their primary residence.
Can I refinance an FHA loan later?
Yes. You can refinance into another FHA loan, including an FHA streamline in some cases, or into a conventional loan if your credit and equity support it, which may let you drop mortgage insurance.
Can the seller help with my FHA closing costs?
Yes, within HUD's limits on seller and other interested-party contributions. The amount is negotiated in your contract and should show up as a seller credit on your Loan Estimate.
Does FHA require a home inspection?
FHA requires an FHA appraisal, which checks value and basic property standards. A separate home inspection isn't required by FHA, but I always recommend getting one.
Is FHA mortgage insurance forever?
Not always. How long the annual premium lasts depends on your down payment and loan terms. Many FHA borrowers later refinance into a conventional loan to remove it once they have enough equity.
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