FHA Housing Limit in Denton and surrounding counties of North Dallas Texas

What is the maximum FHA / Fannie Mae Mortgage amount for North Dallas?

This is a question that gets asked of me, and searched for a lot I have noticed. Fortunately for explanations sake Denton, Tarrant, Collin and Dallas counties all share the same guidelines on the FHA / Fannie Mae loan limits. But, unfortunately finding a home in Dallas may be a little harder to find within the FHA¹ limits.

Typically the next question is

“What is the difference between Conforming and FHA Loan Limits?”

Keeping in mind I am NOT a licensed mortgage broker in Texas, but I am a Texas Affordable Housing Specialist and REALTOR®

Before doing my best at explaining this in a simplistic way, a little history lesson is justified. The Housing and Economic Recovery Act of 2008 changed Fannie Mae’s charter to expand the definition of a “conforming” loan. Effective with the November 2008 release of the conforming loan limits, two sets of limits are provided for first mortgages:

1. General Conforming Loan limits
2. High-cost area Conforming Loan Limits.

These limits may, and probably will be adjusted once we are out of the depressed housing market. Not to say this was too little, too late — But, it is this agents opinion it was definitely too late. If the FHA or Fannie Mae would have made these adjustment much sooner, say Summer of 2006 a lot of the borrowers may have taken advantage of FHA loans over non-conforming conventional loans.

So back to the question — A Conforming Loan Limit is the maximum dollar amount Fannie Mae, or Freddie Mac will insure? A FHA Loan Limit is a maximum dollar amount for a mortgage program. The FHA Section 203(b) is the most frequently used FHA program. There are of course many other facets to each of these, but primarily knowing this you have a starting point on knowing which road to follow in your home search, and choosing your financing options.

The main advantage of an FHA vs. conventional or a conforming FNMA / Fannie² or FHLMC / Freddie³ loans is that the criteria for a borrower are not as strict as conventional loan financing and the down payment or equity requirements are less. Currently 3½% is required for an FHA Mortgage, and that money can be gifted by a family member, or down-payment assistance program. Also you may still be able roll in your closing cost. For example if you are unable to use the USDA loan program because you do not want or wish to live in an eligible areas such as Corinth, Little Elm or Highland Village an FHA mortgage is perfect since there are hundreds of 3 bedroom 2 Bath homes available in Flower Mound, Lewisville and Denton under the $271,050 requirement.

Further comparing a house purchase using FHA loan against a Conforming loan, the FHA loan will generally have the least amount of money required to close and the lower payment in today’s market. FHA loans will allow the borrower who has had a few “credit problems” or those with a limited credit history to buy a home. FHA is not suppose to use a minimum FICO credit score but rather your credit history, and debt-to-income ratio. It is my belief experience that a first time homebuyer should still be around a 600 FICO score to get a competitive interest rate. An FHA Underwriter will require a reasonable explanation of any derogatories, but is suppose to approach a person’s credit history with common sense credit underwriting. Most notably, borrowers with extenuating circumstances surrounding a bankruptcy that was discharged 2 years ago are suppose to be approved for maximum financing.

Historically home buyers, sellers and many REALTORS® alike have had a hard time swallowing digesting an FHA mortgage for many reasons, such as:

• The Dreaded FHA Appraisal — Sellers and Buyers would both fear what an FHA Inspection/Appraisal would uncover, minor issues like wood rot, or water damage on the exterior door frames, or patio porches. Many have even joked about chipped paint, and I am not talking lead-based paint; have sabotaged closings. Fortunately these guidelines have been loosened or made more realistic. Houses purchased with an FHA, or USDA loans still need to have working appliances, heating and A/C, and be free of needing extensive roof or foundation repair. For this reason First-time Homebuyers, or fixed income buyers should really question if Foreclosure or Short-Sale Homes are worth considering. But the FHA has options for those borrowers that qualify as well, with the 203(k) Rehab Mortgage Insurance damage. (Qualified Lenders Only)
• Mandatory Sellers Paying Closing Cost for the Buyer — Many Sellers in the past, when the market was hot, did not even need to consider those buyer prospects that had FHA financing, there were plenty pre-approved buyers with conventional loans. Times have changed, and so did FHA! Now there is only one tax cert that is typically under $200 that the sellers would have to pay to sell the house to the FHA borrower. In the ole’ days this was typically $800-$2,200 for an affordable priced house. Again, another tax write-off for the Seller!
• The FHA charges an annual mortgage insurance premium of 0.5% – 0.55% of the loan amount, until 21% of the mortgage OR the appraised value when refinancing is has been met. However, this can now be written off on your Federal Income Taxes to decrease your taxable liability. It should be said that conventional lenders were also charging this permium, which was typically 2X that amount.

Better wrap this up, I probably lost most of you 2 paragraphs ago. Can you believe I had trouble thinking of something to write about, and now I just keep going.

FHA is not to be feared, if you have a lender trying to talk you out of a FHA mortgage, unless it is a USDA, or VA/TVLB loan the red flag should go up! Usually it is because they make a bigger point spread, the money they make, if they sell you something else from a deposit lender, or private investor. Yes, mortgage insurance sucks! But it is there for a reason, and it is a tax write off. FHA does NOT SET interest rates, but the people who buy the loans back give better interest rates to those that went through FHA underwritiing. With an FHA-insured mortgage, you can make extra payments toward the principal when you make your regularly monthly payment. I can show you a trick that can shave at least 5 years off your mortgage, increase your equity, and pay less in total interest. But I will save that for those that contact me.

1. Federal Housing Authority [↩]
2. Federal National Mortgage Association [↩]
3. Federal Home Loan Mortgage Corporation [↩]

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