Your Texas Mortgage Questions, Answered
Quick answers from Houston mortgage experts. FHA, VA, conventional loans, credit scores, down payments, and Texas-specific guidance.
Can't find your answer? Contact us directly
Getting Started
How do I know if I'm ready to buy a home in Texas?
You're ready when you have: (1) Stable income and employment (2+ years), (2) Credit score of 580+ (FHA) or 620+ (conventional), (3) Down payment saved (3.5-20% depending on loan type), (4) Low debt-to-income ratio (below 43-50%), and (5) Emergency fund for repairs and maintenance. Houston's median home price is around $340,000, so plan accordingly.
What's the difference between pre-qualification and pre-approval?
Pre-qualification is a quick estimate based on self-reported info with no credit check (takes 15 minutes). Pre-approval involves submitting documents, a credit check, and lender verification of your finances (takes 24-48 hours). Pre-approval is required for making offers in competitive Houston markets and shows sellers you're a serious, qualified buyer.
How much home can I afford in Houston?
A general rule: your monthly housing payment should be no more than 28% of your gross monthly income, and total debt payments should be below 43% (DTI ratio). For example, if you earn $6,000/month, your housing payment should stay under $1,680. Use our affordability calculator to get a personalized estimate based on your income, debts, and down payment.
What credit score do I need to buy a house in Texas?
Minimum scores vary by loan type: FHA loans accept 580+ (or 500-579 with 10% down), Conventional loans need 620+, VA loans have no official minimum but lenders prefer 620+, USDA loans need 640+, and Jumbo loans require 700+. Higher scores get better rates. If your score is below 620, focus on credit repair or consider FHA loans.
Loan Programs
Which loan program is best for me?
It depends on your situation: FHA loans are best for lower credit scores (580+) and small down payments (3.5%). VA loans are best for veterans/military with 0% down and no PMI. Conventional loans are best for strong credit (680+) and flexible property types. USDA loans are best for rural/suburban Texas areas with 0% down. Jumbo loans are for high-value properties ($766,550+ in most TX counties). Bank-statement loans are for self-employed borrowers. DSCR loans are for real estate investors.
What is PMI and how can I avoid it?
PMI (Private Mortgage Insurance) is required on conventional loans when you put down less than 20%. It costs 0.5-1.5% of the loan amount annually. To avoid PMI: (1) Put down 20% or more, (2) Use a VA loan (no PMI), (3) Consider lender-paid PMI (higher rate, no monthly PMI), or (4) Use an 80-10-10 piggyback loan (80% first mortgage, 10% second mortgage, 10% down payment).
Can I get a VA loan if I'm a Texas veteran?
Yes! VA loans are available to veterans, active-duty military, reservists (after 6 years), and eligible surviving spouses in Texas. Benefits: 0% down payment, no PMI, competitive rates, and relaxed credit requirements. You'll need a Certificate of Eligibility (COE) from the VA. The VA funding fee (2.15% for first-time use, 3.3% for subsequent use) can be rolled into the loan. Disabled veterans may be exempt from the funding fee.
What is an FHA loan and who qualifies?
FHA loans are government-backed loans with relaxed requirements: 580+ credit score, 3.5% down payment, 43-50% DTI ratio allowed, and flexible underwriting for past credit issues. FHA loans require upfront (1.75% of loan) and monthly (0.45-1.05% annually) mortgage insurance. Best for first-time buyers, lower credit scores, or small down payments. FHA loan limits in Harris County are $498,257 for single-family homes.
Do you offer DSCR loans for investment properties in Texas?
Yes! DSCR (Debt Service Coverage Ratio) loans are ideal for real estate investors. No personal income verification required—approval is based on the property's rental income. DSCR of 1.0+ means the rent covers the mortgage payment. Requirements: 15-25% down, 640+ credit score, DSCR of 0.75-1.25+, and property must be investment (not owner-occupied). Great for self-employed investors with strong rental portfolios.
Down Payments & Closing Costs
How much do I need for a down payment in Texas?
Down payment requirements vary by loan: FHA loans need 3.5%, Conventional loans need 3-5% (first-time buyers) or 10-20% (repeat buyers), VA and USDA loans need 0%, and Jumbo loans need 10-20%. For a $300,000 Houston home, that's $0-$60,000 depending on your loan. Texas also offers down payment assistance programs up to $15,000 for eligible first-time buyers.
Can I use gift funds for my down payment?
Yes! Most loan programs allow gift funds from family members (parents, siblings, grandparents, etc.). You'll need: (1) Gift letter stating the funds are a gift, not a loan, (2) Donor's bank statement showing funds available, (3) Paper trail of the transfer, and (4) Recipient's bank statement showing deposit. Gift funds can cover the entire down payment and closing costs for most programs (excluding investment properties).
What are closing costs and how much should I expect?
Closing costs in Texas typically range from 2-5% of the loan amount. For a $300,000 loan, expect $6,000-$15,000. This includes: origination fees (0.5-1%), appraisal ($450-$700), title insurance ($1,500-$3,000), prepaid taxes and insurance, recording fees, and credit reports. You can ask the seller to pay part of your closing costs (seller concessions) or roll costs into your loan (higher rate for lender credits).
Are there down payment assistance programs in Texas?
Yes! Texas offers several programs: (1) Texas State Affordable Housing Corporation (TSAHC) provides up to $15,000 in down payment assistance, (2) My First Texas Home offers down payment and closing cost assistance with competitive rates, (3) Texas Bootstrap Loan Program for rural properties, and (4) Local programs in Houston, Dallas, Austin, and San Antonio. Eligibility typically requires first-time buyer status, income limits, and homebuyer education.
Credit & Qualification
Can I buy a house with student loan debt?
Yes! Student loans are factored into your debt-to-income ratio (DTI). Lenders use your actual monthly payment (or 0.5-1% of the balance if in deferment/forbearance). To qualify: Keep total DTI below 43-50%, consider income-driven repayment plans to lower payments, and provide documentation of your payment plan. Student loans don't disqualify you—they just affect how much home you can afford.
How can I improve my credit score before applying?
Boost your score in 3-6 months: (1) Pay all bills on time (biggest factor), (2) Pay down credit card balances below 30% utilization, (3) Don't close old credit cards (age of credit matters), (4) Dispute any errors on your credit report, (5) Avoid new credit inquiries, and (6) Consider becoming an authorized user on a family member's card. Check your credit 6 months before applying to allow time for improvements.
What is debt-to-income ratio (DTI) and why does it matter?
DTI is your total monthly debt payments divided by your gross monthly income. Lenders use DTI to assess your ability to afford a mortgage. Most programs require DTI below 43-50%. Example: If you earn $6,000/month and have $1,000 in debts (car, student loans, credit cards), your DTI is 16.7%. Add a $1,800 mortgage payment and your DTI becomes 46.7%. To lower DTI: pay off debts, increase income, or buy a less expensive home.
Can I get a mortgage if I'm self-employed or a business owner?
Yes! Self-employed borrowers have options: (1) Traditional mortgage with 2 years of tax returns (may show lower income), (2) Bank-statement loan using 12-24 months of business bank statements (calculates income from deposits), (3) P&L statement loan (uses profit & loss prepared by CPA), or (4) DSCR loan for investment properties (no personal income verification). Requirements: 2+ years in business, 620+ credit, 10-20% down, and consistent cash flow.
Process & Timeline
How long does it take to close on a house in Texas?
Typical timeline is 30-45 days from application to closing. Refinances can close in 20-30 days. Purchases take longer due to inspections, appraisals, and negotiations. Factors affecting timeline: appraisal delays (7-14 days), title issues, missing documentation, or underwriting conditions. Cash-out refinances and complex scenarios may take 45-60 days. Plan for 45 days to be safe.
What documents do I need to apply for a mortgage?
Gather these before applying: (1) Last 2 years W-2s and tax returns, (2) Recent pay stubs (last 2 months), (3) Bank statements (last 2 months, all accounts), (4) Photo ID (driver's license or passport), (5) Employment verification letter, (6) Proof of additional income (rental, bonuses, etc.), (7) Divorce decree or child support docs (if applicable), and (8) Gift letter (if using gift funds). Self-employed borrowers need business tax returns and P&L statements.
When should I lock my interest rate?
Most borrowers lock once they have a ratified contract (purchase) or completed application (refinance). Lock periods are typically 30, 45, or 60 days. Lock when: (1) You're comfortable with the rate, (2) You have a clear timeline to close, and (3) You want protection from rising rates. If rates are falling, you might wait. If rates are rising, lock early. Discuss strategy with your loan officer based on market conditions.
What happens on closing day?
Closing day process: (1) Final walk-through of property (if purchase), (2) Review and sign loan documents at title company or attorney's office (1-2 hours), (3) Wire closing funds to title company, (4) Sign deed, mortgage note, and closing disclosure, (5) Title and deed recorded with county, and (6) Receive keys to your new home! Bring photo ID and cashier's check for closing costs. Closing typically takes 1-2 hours.
Texas-Specific Questions
What is the homestead exemption in Texas and how do I apply?
Texas homestead exemption reduces your property tax bill by exempting a portion of your home's value from taxation. Benefits: Saves $200-$400+/year, protects equity from creditors, and limits annual tax increases to 10%. To apply: File application with your county appraisal district by April 30 of the year after purchase. You must occupy the home as your primary residence by January 1. Available in all Texas counties including Harris, Fort Bend, Montgomery, and Galveston.
Are there special programs for first-time homebuyers in Houston?
Yes! Houston and Texas offer: (1) Texas State Affordable Housing Corporation (TSAHC) with up to $15,000 down payment assistance, (2) My First Texas Home with competitive rates and assistance, (3) City of Houston HOME Program for low-to-moderate income buyers, (4) Harris County Housing Finance Corporation programs, and (5) FHA/VA/Conventional loans with low down payments. Most require homebuyer education classes and income limits apply.
What areas in Houston have the best home values?
Best value areas in Greater Houston: (1) Katy/Cypress (excellent schools, new construction), (2) Pearland/Friendswood (family-friendly, good schools), (3) Sugar Land/Missouri City (upscale suburbs), (4) The Woodlands (master-planned, premium), (5) Spring/Tomball (affordable, growing), and (6) League City/Clear Lake (near NASA, coastal access). Median prices range from $250K (outer suburbs) to $500K+ (inner loop). Consider commute, schools, flood risk, and HOA fees.
Do I need flood insurance in Houston?
Flood insurance is required if your home is in a FEMA Special Flood Hazard Area (SFHA or Zone A/V) and you have a federally-backed mortgage. Even outside flood zones, consider flood insurance—many Houston areas flood due to heavy rain. Cost: $400-$2,000+/year depending on flood risk. Check FEMA flood maps or ask your lender. After Hurricane Harvey, many non-flood-zone homes flooded. Flood insurance is separate from homeowners insurance.
Still Have Questions?
Our Houston-based loan officers are ready to answer your questions and create a custom mortgage plan for your situation.