FHA Loans
THE LOAN BUILT FOR REAL CREDIT HISTORIES
FHA exists because not every good borrower has a spotless file. Insured by the Federal Housing Administration, it opens the door on credit and debt where conventional guidelines close it — and it comes with one long-term cost worth understanding before you sign.
Start Here
Who Actually Lends You the Money
A common misreading: people assume the government lends the money on an FHA loan. It doesn’t. The loan comes from an FHA-approved lender, exactly like any other mortgage. What the Federal Housing Administration does is insure it — it promises to cover the lender’s loss if the loan defaults.
That insurance is the entire mechanism. Because the lender’s downside is covered, it can say yes to a borrower it would otherwise decline: a credit score in the 500s or low 600s, a debt load above conventional comfort, a bankruptcy a few years back. The risk didn’t disappear — it moved.
And you pay for it. FHA mortgage insurance is what funds that guarantee, and it works differently from the PMI on a conventional loan. That difference is the most important thing on this page, and it’s covered in full below.
Who It’s For
Four Things People Get Wrong About FHA
More misconceptions attach to this program than any other, and a few of them talk people out of a loan they’d have been approved for.
“It’s only for first-time buyers”
It isn’t. FHA is open to repeat buyers too. It’s popular with first-time buyers because of the low down payment and the flexible credit rules, and that popularity hardened into a rule that was never there.
“It’s harder to qualify for”
The opposite. Easier qualifying is the whole reason the program exists. What FHA asks in exchange is mortgage insurance and a property that meets its condition standards — not a stronger borrower.
“You can’t buy a duplex with it”
You can — up to four units, as long as you live in one of them as your primary residence. Rent from the other units may even help you qualify. It’s one of the more overlooked features of the program.
“It’s always the cheaper loan”
Not always. FHA note rates are often lower than conventional, which makes the monthly payment look better up front. But the mortgage insurance can outlast the savings. Cheaper to get into, not always cheaper to keep.
Past bankruptcy or foreclosure doesn’t rule you out either — there are waiting periods, covered below, and they’re shorter than most people assume.
Qualifying
What FHA Asks For
Credit and down payment move together
FHA’s own rules set two tiers: a score of 580 or above qualifies for the 3.5% minimum down payment, and a score between 500 and 579 requires 10% down. One important caveat a broker will tell you and a rate table won’t — individual lenders set their own floors above FHA’s, and many won’t go near 500. Chet works with a range of them, which is exactly why the floor differs depending on where the loan is placed.
Debt-to-income, with room to breathe
You’ll still see the old 31% and 43% benchmarks quoted on plenty of websites. Those are the reference points for a file underwritten by hand. Most FHA loans today run through automated underwriting, which regularly approves higher ratios when the rest of the file supports it — reserves, a solid payment record, a stable job. Don’t rule yourself out on a ratio you calculated at the kitchen table.
Waiting periods after a bankruptcy or foreclosure
A Chapter 7 bankruptcy generally means two years from discharge. A Chapter 13 can qualify after twelve months of on-time payments inside the plan, with court approval — you don’t always have to wait for it to finish. A foreclosure is generally three years. Documented extenuating circumstances can shorten any of these.
The down payment can be a gift in full
FHA permits the entire down payment to come from an acceptable gift — family, an employer, certain assistance programs — on a primary residence. It has to be documented properly and it cannot be a loan in disguise. This is more generous than conventional financing and it’s the piece that most often makes an FHA purchase possible.
You have to live there
FHA is a primary-residence program. No second homes, no pure rental properties. Two years of verifiable employment is the general standard, though gaps and career changes are workable when they’re explained and documented.
Mortgage Insurance
The Part That Decides Whether FHA Is Right for You
Every FHA loan carries two mortgage insurance premiums, and there is no down payment large enough to avoid them. Understanding how they behave is the difference between FHA being a smart move and an expensive habit.
Upfront premium — 1.75%
Charged once, calculated on the base loan amount. It is almost always financed into the loan rather than paid at closing, so it doesn’t come out of your pocket on closing day — but it does increase what you owe and what you pay interest on.
Refinance from one FHA loan into another within three years and a portion of it is refunded toward the new loan’s upfront premium.
Annual premium — paid monthly
Despite the name it’s collected in your monthly payment. On 30-year loans in the range that applies across Chet’s service area, it runs 0.55% of the loan balance where the loan-to-value is above 95%, and 0.50% once you put down 5% or more.
The premium is recalculated annually as the balance falls, so the monthly amount drifts down slowly over time.
The eleven-year rule — the single most consequential detail on this page
- Put down less than 10%, and the annual premium stays for the life of the loan. It does not fall off when you reach 20% equity. It does not fall off at 22%. Getting rid of it means refinancing into a different loan entirely.
- Put down 10% or more, and the annual premium drops off after eleven years. Same loan, same program — a different outcome, decided entirely at closing.
- It keys off your ORIGINAL loan-to-value, not your current one. Paying the balance down aggressively afterward does not move you from one column to the other. The decision is made once, on day one, and it cannot be undone later.
This is why the down payment conversation on an FHA loan is worth having carefully rather than defaulting to the minimum. Coming up with 10% instead of 3.5% doesn’t just lower the payment — it buys an exit. Whether that trade makes sense depends on how long you expect to keep the loan, which is a conversation, not a calculator.
Loan Limits
How Much You Can Borrow on FHA Here
FHA caps its loan amounts county by county. For 2026 the floor — the figure that applies in most of the country — is $541,287 for a one-unit property, rising to $1,249,125 in a small number of designated high-cost areas.
Kerr County, Bexar County and the surrounding Hill Country all sit at the floor, so $541,287 is the working ceiling across Chet’s service area. Limits are higher for two-, three- and four-unit properties. HUD resets these every year alongside the conforming limits, so confirm the current figure before you plan around it.
Above the FHA limit, or credit strong enough to choose?
Conventional financing has a higher ceiling and mortgage insurance that ends. If your score is comfortably above 620 and you have some down payment, the two are worth pricing side by side before you assume FHA is the cheaper road.
The Property
The House Has to Qualify Too
This is the part that surprises buyers, and the part that matters most on an older or rural home. On a conventional loan the appraiser is chiefly establishing value. On an FHA loan the appraiser is FHA-approved and is also confirming the property meets HUD’s minimum standards — that it’s safe, sound and secure.
- What gets flagged. Peeling or chipping paint on a home built before 1978, a roof near the end of its life, exposed wiring, missing handrails, broken windows, an inoperable heating system, standing water or foundation concerns. Cosmetic ugliness is fine. Anything reading as a health or safety issue is not.
- Wells and septic get real scrutiny. Common on Hill Country acreage, and FHA has specific requirements about testing and about the distance between a well and a septic system. Worth raising before you’re under contract, not after the appraisal comes back.
- Flagged items usually have to be fixed before closing. Which becomes a negotiation with a seller who may not want to spend the money. On a competitive listing this is the practical reason an FHA offer sometimes loses to a conventional one — not the buyer, the paperwork.
- There is a program for houses that need work. FHA’s 203(k) renovation loan finances the purchase and the repairs in a single loan, underwritten against what the home will be worth once the work is done. It’s the right answer for a property that can’t pass as-is but is worth buying.
Local Detail
What FHA Buyers Around Kerrville Should Know
- The loan limit shapes your search. At $541,287 the FHA ceiling sits below a meaningful share of Hill Country listings, particularly anything with acreage or river frontage. Knowing the number before you tour houses saves the harder conversation later.
- Rural and older housing stock cuts both ways. FHA’s flexible credit rules suit plenty of buyers here; its property standards are less forgiving of the wells, septic systems and older roofs that come with the territory. The program and the property have to work together, and that’s worth checking early.
- Budget from the full payment. Texas has no state income tax and correspondingly higher property tax rates, and your escrow collects taxes and insurance monthly on top of principal, interest and the FHA premium. The all-in number is well above what a payment calculator suggests.
- File your homestead exemption once you close on your primary residence. It reduces the taxable value and limits how fast the assessment can climb. It’s free and it is not automatic.
- FHA is not a dead end. Buyers routinely use FHA to get into a home, then refinance to conventional once credit and equity improve — which is also how you shed mortgage insurance that would otherwise last the life of the loan. Worth planning as a two-step from the beginning rather than discovering it years later.
If This Isn’t Quite Your Situation
Other Programs Worth a Look
Conventional Loans
Stronger credit and some down payment? Mortgage insurance that cancels often makes conventional the cheaper loan to keep.
Learn More →VA Loans
If you’re an eligible veteran or service member, VA almost always beats FHA — no down payment and no monthly mortgage insurance.
Learn More →USDA Loans
Buying outside the city limits? A USDA loan can mean no down payment at all, if the property and your income qualify.
Learn More →FHA Loan Questions
What credit score do I need for an FHA loan?
Does FHA mortgage insurance ever go away?
Are FHA loans only for first-time buyers?
Can I buy a duplex or fourplex with an FHA loan?
How much can I borrow with FHA around Kerrville?
Can my whole down payment be a gift?
Why did the appraiser flag things on the house?
Can I get an FHA loan after bankruptcy or foreclosure?
Chet’s full Mortgage FAQs page covers credit, closing costs, appraisals and what to expect at every step.
Find Out Where You Stand
FHA, conventional, or something else — a short conversation settles it. No cost, no obligation.
