FHA loans were first introduced into the mortgage lending marketplace back in 1934 in an attempt to establish standard guidelines banks could follow that also came with a government-backed guarantee. Prior to this introduction, lending guidelines were essentially all over the map and many potential homeowners were left out of homeownership due to the large down payments required and relatively strict approval requirements.
Over the years, FHA loans have developed into one of the most attractive financing options in Austin, Texas and Travis County. FHA is the acronym for the Federal Housing Administration.
The government-backed guarantee accompanies all FHA loans and in the form of a mortgage insurance policy. Should the loan ever go into default and the property foreclosed upon, the lender is compensated for the loss as long as proper FHA lending guidelines were followed when the loan was initially approved.
This mortgage insurance comes in two forms, an upfront mortgage insurance premium that is rolled into the loan amount and an annual premium that is paid monthly.
FHA loans in Austin, Texas can be used to finance a primary residence only and cannot be used to finance a second home or a rental property as the borrowers are required to occupy the home being financed. FHA loans can be used to finance a single-family home, a duplex/triplex/fourplex as long as one of the units is occupied by the borrowers.
Credit requirements for FHA loans in Austin and Travis County ask for a minimum credit score of 600 for a max of 96.5% financing. When lenders process an FHA loan application, they request a credit report and credit scores from Equifax, Experian and TransUnion.
Each will provide its own credit score and while these three-digit scores range from 300 to 850 and while the three scores will be similar they are very rarely exactly the same due to different merchants reporting different credit information at different times on various accounts.
Of the three scores, lenders will throw out the lowest and highest scores and use the middle score for qualifying purposes. If there is more than one borrower on the application, the lender uses the lowest of the middle scores provided.
Down payments for FHA loans ask for at least a 3.5% down payment from the borrower’s own funds. These funds can come from an account the borrowers own such as a savings or checking account, as well as in the form of a financial gift from a qualified source such as a relative or a non-profit agency. On a home sale in Austin where the home is sold for $300,000, the down payment amount is $10,500 for example. This is great for first-time home buyers who have limited cashed saved.
FHA loans are fully documented, which means the lender will verify certain aspects of your loan application via a third party. For example, when verifying your income, the lender will ask for your most recent paycheck stubs that cover 30 days as well as your two most recent W2 forms. If you’re self-employed, you can expect to provide your two most recent federal income tax returns, both personal and business returns. The self-employed borrower will also be asked to provide a year-to-date profit and loss statement.
Finally, while FHA provides the lending guidelines mortgage companies must follow, FHA does not actually approve any loan application or any aspect of the loan, including the property appraisal. Instead, the lender is required to follow the lending guidelines set forth by the FHA.
Read more about Texas FHA loan criteria here.
Austin FHA Loan Limits 2025:
| MSA Name | County Name | One-Family | Two-Family | Three-Family | Four-Family | Median Sale Price | ||||||
| AUSTIN-ROUND ROCK-GEORGETOWN, TX | TRAVIS | $571,550 | $731,700 | $884,450 | $1,099,150 | $482,000 |
If you or someone you know is seeking a loan program that can be used almost anywhere, including Austin, the FHA loan program should be explored.
Contact FHA Mortgage Source for more details by calling ph: 800-743-7556 or simply submit the Info Request Form on this page.