An FHA loan is a mortgage made by a private lender and insured by the Federal Housing Administration, part of HUD. Because FHA insures the lender against loss, the program accepts a smaller down payment and a wider range of credit than many other loans, and in exchange every FHA borrower pays mortgage insurance premiums. In Texas, FHA works for first-time and repeat buyers alike, as long as the home will be your primary residence and the property meets HUD's standards. With me, the FHA minimum credit score is 580, and I do offer FHA manual underwriting when a file needs it.
This guide covers how FHA actually works: who's eligible, how the down payment and credit rules fit together, what the underwriter and appraiser look at, what mortgage insurance costs and how long it lasts, and when a conventional loan might fit you better.
FHA doesn't lend money to homebuyers. A lender approved by FHA makes the loan, underwrites it to HUD's rules, and then applies for FHA insurance on it. If the borrower later defaults and the home goes to foreclosure, FHA pays the lender's covered loss out of a fund that borrowers pay into through their premiums. Because the lender's risk is insured, the lender can accept a smaller down payment and more varied credit histories than it would on an uninsured loan.
That also explains the cost. Every FHA borrower pays into the insurance fund, once at closing and then monthly. The premium is the price of the lower entry point.
FHA is a loan type, with a note, a deed of trust, and full underwriting, repaid like any other mortgage. It isn't a grant or a first-time buyer program, and it isn't limited to first-time buyers.
HUD publishes its requirements in the Single Family Housing Policy Handbook, HUD 4000.1. The version lenders follow today is Update 17, issued Nov 26, 2025. HUD issued Update 18 on Aug 12, 2026; lenders may adopt it now and must use it by Nov 10, 2026, and it does not change the FHA rules described on this page (HUD 4000.1). Lenders underwrite to the current 4000.1 and to Mortgagee Letters, the notices HUD issues when it changes a rule. HUD's older single family handbooks, which 4000.1 replaced, are retired and aren't used to underwrite a file today. If you see an article quoting them, treat it as history.
Some lenders add overlays, which are their own rules stricter than HUD's. That's why two lenders can answer the same FHA file differently. Our company has one FHA overlay: a minimum credit score of 580. Beyond that, we follow HUD's guidelines.
Every FHA purchase borrower has to make a Minimum Required Investment, or MRI, required by Section 203(b)(9) of the National Housing Act. HUD figures it on the Adjusted Value, which for a purchase is the lesser of the purchase price, less any inducements to purchase, or the appraised value. The handbook sets the MRI and the matching maximum loan-to-value (HUD 4000.1 II.A.2.a, II.A.2.b and II.A.2.c.ii). The exact amount for your loan shows up on your Loan Estimate.
Three details matter in practice.
The money can come from your own savings or from sources HUD allows, like a documented gift from an eligible donor or certain down payment assistance. In Texas, state programs from TSAHC and TDHCA can pair with FHA when you meet their rules. Each has its own credit score, income, and purchase price limits, so check those before you count on them. My down payment assistance guide walks through the options.
HUD ties your Minimum Decision Credit Score to FHA eligibility and to how much can be financed (HUD 4000.1 II.A.1.b.ii(A)(3) and II.A.2.b.i). Here's how the layers stack up:
The score used comes from the lender's three-bureau report: the middle score when there are three, the lower when there are two, and the lowest borrower's score when there's more than one borrower. HUD also has separate rules for borrowers with no credit score. If that's you, ask me how this applies to your file before you assume either way.
Coming in 2027, not today: HUD Mortgagee Letter 2026-11 changes FHA's credit score rules, including allowing additional score models, but only for case numbers assigned on or after Jan 1, 2027 (HUD ML 2026-11). A file with an earlier case number follows the current rules.
Most FHA files run through FHA's TOTAL Mortgage Scorecard, which works inside the automated underwriting systems lenders already use. It returns either an Accept or a Refer. An Accept means the file can be approved with the documentation the findings call for. A Refer means a human underwriter has to manually underwrite it to the handbook's stricter standards for debt-to-income, reserves, and credit (HUD 4000.1 II.A.4.a and II.A.5). I offer FHA manual underwriting, but it isn't automatic. A Refer file is approved only if it meets HUD's manual standards and our 580 minimum.
Either way, the underwriter verifies the same basic facts:
FHA appraisals are done by appraisers on FHA's roster, and they're doing two jobs (HUD 4000.1 II.A.3). One is market value, the same as on any loan. The other is reporting whether the home meets HUD's minimum property requirements for safety, security, and soundness. Peeling paint on a pre-1978 house, a missing handrail on a steep stair, a roof near the end of its life, or a water heater without a proper relief line are typical items an FHA appraiser can call out as repairs.
Those repairs have to be completed, or handled the way the program allows, before closing. On a resale, the seller usually does the work, so if you're writing an FHA offer on an older house in Fort Worth, expect the appraisal to read condition closely. If the house needs real work, an FHA 203(k) renovation loan can roll repair costs into the mortgage.
Two more property rules worth knowing:
FHA has maximum loan amounts set by metropolitan area and county. HUD publishes updated limits for each calendar year, and the handbook now points to HUD's lookup instead of printing them (HUD 4000.1 II.A.2.a.ii). I'm not printing a number here because it changes every January. Check the current limit for Tarrant, Parker, Johnson, or any Texas county on HUD's FHA mortgage limits lookup. A loan amount above your county's limit is outside FHA.
FHA charges two premiums. The upfront mortgage insurance premium, UFMIP, is charged at closing and can be financed into the loan. It's separate from the minimum investment, so financing it doesn't reduce what you have to invest (HUD 4000.1 II.A.2.a.iii and II.A.2.e.i). Because it's added to the base loan, your final note amount is larger than the base loan amount, and that's what you actually owe.
The annual premium is figured each year and paid monthly with your mortgage payment. HUD sets the annual premium in a table by loan amount, loan-to-value, and term, and changes that table from time to time through Mortgagee Letters. The specific figures are covered in their own article.
FHA mortgage insurance follows HUD's rules, not the private mortgage insurance rules on conventional loans. The Homeowners Protection Act cancellation path for private mortgage insurance doesn't apply to FHA premiums. How long the annual premium lasts depends on your loan-to-value and when the loan was endorsed. A common way out later is refinancing into a conventional loan once you have enough equity, which brings its own costs.
People call any low-down-payment loan an FHA loan. Conventional, USDA, and VA are separate programs with their own minimums, insurance or guarantee fees, and property rules. If you have a strong score and a small down payment, a conventional loan with private mortgage insurance may compare well against FHA. If your score is lower or your debt-to-income ratio is higher, FHA's structure often fits better. The useful comparison is two Loan Estimates side by side, including the mortgage insurance on each and how long it lasts.
A few FHA features other loans handle differently:
This example is made up to show how the layers work.
Jasmine is buying a 1960s brick home in Fort Worth's Ridglea area. Her middle score is 604, she has a student loan in good standing, and her parents are giving her part of the money to close. Her score clears our 580 minimum. TOTAL returns an Accept, so she doesn't need manual underwriting. Her gift is documented with a gift letter and a paper trail. The FHA appraiser flags peeling exterior paint and a missing stair handrail, and the seller fixes both before closing. Her Loan Estimate shows the base loan, the financed upfront premium, and the annual premium so she can compare it to a conventional quote.
I'll read your credit, income, and savings against FHA and conventional at the same time, so you can see which rulebook fits and what each would cost over the time you expect to keep the home. Schedule a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026