FHA Loans in Houston: Lower MIP Costs and 7 Benefits for Homebuyers

FHA Loans in Houston are Cheaper

FHA loans in Houston are cheaper because the Federal Housing Administration (FHA) reduced its Mortgage Insurance Premiums (MIP) costs.

Key Takeaways:

• FHA MIP costs were reduced from 0.85% to 0.55%

• Potential savings of up to $1,056 annually and $31,680 over a 30-year loan ($350k 30yr loan)

• In Texas, FHA loan limits are $472,030 for single-family FHA home loans.

• Federal Housing Administration (FHA) loans offer numerous benefits, including lower down payments, flexible qualifications, higher debt to income ratios, and affordability.

• FHA loans are flexible with low credit scores, low down payments, and flexible income limits. FHA loans are also available for multifamily homes.

• First Time Home Buyers with a Texas FHA lender can find various loan amount options available with an FHA loan program that might not be available with conventional loans.

• There isn’t a maximum purchase price limitation on an FHA loan from a lender. There also isn’t a maximum gross income limitation on an FHA lender mortgage loan.

FHA MIP Cost Reduction and Potential Savings

The FHA has reduced its MIP costs from 0.85% (annually, paid monthly) to 0.55% for an FHA loan. This reduction in MIP costs for an FHA loan can lead to significant savings with monthly payments for borrowers. For example, on a $350,000 loan, the monthly payments for MIP costs decrease from $248 to $160, resulting in an annual potential savings of up to $1,056 and a staggering $31,680 over the life of a 30-year FHA loan.

Why FHA Mortgage Rates Are Lower

FHA mortgage insurance on an FHA loan protects FHA lenders from losses resulting from loan default. This feature allows FHA mortgage rates to often be lower than conventional loans.

Benefits of FHA Loans in Houston

Low down payment

• FHA loans from an FHA lender allow for a minimum down payment as low as 3.5%, making homeownership more accessible to a broader range of potential home buyers.

• Lower down payment with a low interest rate and higher debt to income ratios due to other monthly obligations is also allowed for FHA remodeling and renovation loans (FHA 203k). FHA 203k loans are available from FHA approved lenders.

Gift funds allowed

• Homebuyers can use gift funds from family or friends for their down payment with an FHA loan, further easing the financial burden of purchasing a home.

• First time homebuyers can also receive gift funds, seller paid closing costs such as title insurance and property survey. The real estate agent familiar with FHA loans will be able to guide a first time home buyer in preparing the purchase and sales agreement with FHA guidelines and lender payment requirements in mind.

Seller contributions

• FHA loan requirements allow the Seller to contribute up to 6% of the sales price towards the buyer’s closing costs, reducing out-of-pocket expenses for homebuyers using an FHA loan. Borrowers with lower credit scores on their credit reports.

Flexible qualification

FHA loans often have more lenient qualification requirements compared to other mortgage loan programs, making it easier for a wider range of borrowers to secure financing. Borrowers with a lower credit score and higher debt-to-income ratio might see cheaper interest rates and a lower down payment with an FHA loan program from their mortgage lender, mortgage broker, or FHA-approved mortgage lender.

Consistent rates across credit score ranges

• Unlike other loan types, the FHA loan interest rate and down payment generally remain the same for both higher and low credit scores, making it a more attractive option for borrowers with less-than-perfect credit scores.

• Conventional mortgage insurance (“MI” or “PMI”) can be more expensive than FHA because private MI premiums can vary due to borrower credit scores and other factors.

• FHA mortgage insurance premiums don’t vary due to income ratios, median home price, your choice of mortgage lenders, income ratio or credit score information showing on a new credit report. FHA lenders don’t impact the choice of MI provider or premiums.

• A non-government backed loan from a mortgage lender provides private mortgage insurance options from private MI providers, and premiums can vary.

Purchase and renovation financing

• FHA loans can be used to both purchase and renovate a home, allowing borrowers to finance improvements and repairs as part of their mortgage with a low down payment.

• Down payment as low as 3.5% is available, even for duplexes and 4-plexes.

• The FHA home loan program known as 203k for a primary residence can have easier FHA loan requirements than most conventional loans including a straightforward loan process, generous FHA loan amounts, a lower minimum credit score, and a higher income ratio

Affordability

• FHA loans can be more affordable than conforming loans due to the lower monthly MIP costs, low down payment, and low closing costs, making them a cost-effective option for many homebuyers.

  

What is the FHA loan limit for Houston, Texas?

• In Texas, FHA loan limits are $472,030 for single-family FHA home loans.
• FHA home loan programs in Houston have a $604,400 loan limit for a Duplex.
• Harris County, Texas has loan limits of a $730,525 Triplex limit for a Houston FHA loan.
• Montgomery County, Texas FHA Loan Programs have a $907,900 loan limit for a 4-Plex.

The Benefits of Lower MIP Costs on FHA Loans in Houston

With the reduction in FHA MIP costs for an FHA loan, FHA home loans have become more affordable and accessible for Houston homebuyers. Lower monthly MIP costs make it easier for borrowers to qualify for an FHA loan and provide lower monthly mortgage payments.

An FHA loan enables more people to realize the dream of homeownership or refinancing to a lower-cost loan, even with lower credit scores.

FHA Refinancing Programs

The FHA offers several programs for refinancing, including the streamline refinances and the FHA Simple Refinance. Streamline refinances provide a hassle-free refinancing option for borrowers, allowing them to refinance their existing FHA-insured mortgage with limited credit documentation and underwriting.

Similarly, the FHA Simple Refinance program allows homeowners to refinance their current FHA loan into a new one, whether it’s a fixed-rate loan or an ARM. By doing so, homeowners can lower their interest rates or monthly payments, freeing up more money to pay off debt or save for emergencies.

Moreover, the FHA also offers an Energy Efficient Mortgage (EEM) program that allows homeowners to finance energy-efficient improvements with their FHA-insured mortgage, thereby saving money on their utility bills. The EEM recognizes that energy-efficient homes have lower operating costs, making them more affordable for homeowners.

FHA energy improvement loans provide an opportunity for homeowners to make energy-efficient improvements to their homes, which can save them money in the long run while also contributing to the environment by reducing energy consumption.

Benefits for Homeowners and Homebuyers

The recent reduction in FHA MIP costs by the Federal Housing Administration has made FHA loans in Houston an even more attractive option for homebuyers and homeowners reviewing the benefits of different types of mortgage loans. With a range of FHA loan benefits for FHA mortgage loans, including lower down payments, flexible qualification requirements, and reduced monthly MIP costs, FHA loans are an excellent choice for those looking to purchase or refinance a home in the Houston area and throughout Texas.

Contact Steve Silver at Silver Mortgage, at 1-800-920-5720.

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References

• White House announcement on FHA MIP cost reduction with an FHA loan (Feb 22, 2023)