Home buyers across the Dallas-Fort Worth metro area will have a higher range of mortgage financing to work with in 2022, due to a recent increase in loan limits. Both conforming and FHA limits for the DFW area have been increased for 2022 in response to rising home prices.

What does this mean to you, as a home buyer and borrower? Read on to find out.

Dallas-Fort Worth Loan Limit Increased for 2022

Most of the mortgage loans available today have a maximum amount or limit for borrowers. This is true for conventional (or “regular”) mortgage loans, as well as the government-backed programs like FHA. Borrowers who wish to use a particular home loan program have to stay within these limits, with a few exceptions.

This can be a confusing subject if you’re new to it. So let’s take it one program at a time.

Conforming Loan Limit Increased to $647,200

A conventional mortgage loan is one that is not insured or guaranteed by the government. The term “conventional” is used to differentiate these products from the government-backed programs like FHA and VA.

Now let’s break it down further.

In terms of their size, conventional loans can either be conforming or jumbo.

• A conforming loan is one that meets the guidelines and parameters established by the Federal Housing Finance Agency (FHFA). It can be sold into the “secondary” mortgage market via Freddie Mac and Fannie Mae. It conforms to their standards, hence the name.
• A jumbo loan, on other hand, exceeds the conforming loan limit for the county where the home is located.  Therefore, it cannot be sold to Fannie or Freddie.

Federal housing regulators determine the conforming loan limits for the Dallas-Fort Worth area, and for the rest of the country. Subsequently in 2022, those limits will be going up due to rising home prices nationwide.

In November, the FHFA announced that “the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2022.  In most of the U.S., the 2022 maximum conforming loan limit (CLL) for one-unit properties will be $647,200, an increase from $548,250 in 2021.”

In 2022, the conforming loan limit for a single-family home in the DFW area is $647,200.

This applies to all counties within the Dallas-Fort Worth-Arlington metropolitan area (a.k.a., DFW metroplex). Collin, Dallas, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise counties all have the same conforming loan limit for 2022 — $647,200.

Jumbo Mortgage Threshold Going Up as Well

Home buyers with sufficient income can borrow more than the DFW conforming loan limit mentioned above. In industry lingo, this financing option is referred to as a “jumbo” loan.

In 2022, a jumbo loan in the Dallas-Fort Worth area is anything above $647,200.

Jumbo mortgage products tend to have stricter criteria, due to the larger amount being borrowed. Borrowers seeking a jumbo loan in Dallas must show that they have enough income to manage the monthly mortgage payments, along with other recurring debts. This is true for all mortgage loans, but the “bar” is typically set higher for jumbo loans due to their larger size.

Maximum FHA Loan Amount for Texas: $420,680

The Federal Housing Administration (FHA) loan program has its own unique set of loan limits. These mortgage loans are originated by lenders within the private sector, as with conventional. Unlike conventional mortgage products, FHA loans are insured by the federal government.

The Department of Housing and Urban Development (HUD) oversees the FHA program. In early December, HUD officials announced that the FHA loan limits for the DFW area — and most other counties across the U.S. — would be increased for 2022.

The 2022 FHA loan limit for the state of Texas will be $420,680, a slight increase from the 2021 limit of $411,700. That’s for a regular single-family home with only one residence. There are higher limits for duplexes and other multifamily properties.

Here are the DFW FHA loan limits for 2022, across all property types:

• One-family: $420,680
• Two-family: $538,650
• Three-family: $651,050
• Four-family: $809,150

As with the conventional caps above, these FHA limits apply to all counties across the DFW metroplex. That includes the counties of Collin, Dallas, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise.

In conclusion, the 2022 FHA and conforming loan limits for the Dallas-Fort Worth area, along with the revised jumbo loan threshold.

Learn more about the mortgage process. Contact a loan advisor today to take advantage of the loan limit increase.

The post Loan Limit Increased for 2022: Conforming, FHA and Jumbo appeared first on Trinity Oaks Mortgage.

FHA loans are a popular financing option among home buyers in Texas. This program appeals to first-time buyers in particular, especially those with limited funds in the bank. FHA loans offer several key advantages, including a relatively low down payment of just 3.5%. As with all mortgage programs, there are certain guidelines and FHA loan requirements in Texas. Below, we will examine some of the minimum requirements for this program.

Minimum FHA Loan Requirements in Texas

Federal Housing Administration (FHA) loans are originated by mortgage lenders in the private sector, just like most other types of mortgage loans. Insurance is what makes the program unique. The federal government partially insures FHA loans, and that’s what distinguishes them from conventional or “regular” mortgage products.

The Federal Housing Administration falls under the Department of Housing and Urban Development (HUD). Among other things, HUD establishes the minimum guidelines for this mortgage program. Here are the basic eligibility FHA Loan Requirements in Texas.

Minimum Down Payment

Borrowers who use this program to buy a home must put down at least 3.5% of the appraised value or purchase price. That’s one of the key benefits offered by the FHA loan program. It allows for a relatively low down payment, reducing one of the hurdles to homeownership.

The down payment money doesn’t necessarily have to come out of your own pocket. When using an FHA loan to buy a home in Texas, you could obtain some of your down payment funds from a third-party donor. Family members and other approved sources can contribute money to your minimum required down payment — another big advantage.

But there are requirements for this as well. Down payment gift money must be thoroughly documented. The person providing the funds must submit a signed letter stating that they do not expect any kind of repayment.

Credit Scores

Credit scores are another important requirement when using a Texas FHA loan. Your credit score shows how you have borrowed and repaid money in the past. It’s based on information contained within your credit reports.

People who typically pay their bills on time tend to have higher scores, while those with a pattern of late or missed payments often have lower ones.

When it comes to the credit score requirements for Texas FHA loans, there are two important numbers you should know about — 500 and 580. According to HUD, borrowers must have a credit score of 500 or higher to be eligible for the program. To take advantage of the popular 3.5% down payment option mentioned above, borrowers must have a score of 580 or higher.

Debt-to-Income Ratios

When applying for a mortgage loan in Texas (whether it’s FHA, conventional or VA), you’ll probably encounter the term “debt-to-income ratio.” As the name suggests, this ratio compares your gross monthly income to your recurring monthly debts. It’s a risk-assessment tool.

Having a lower debt-to-income ratio can increase your chances for qualifying for an FHA loan in Texas. A higher-than-average “DTI” ratio can have the opposite effect, especially if it rises above the 50% mark. The goal here is to ensure that you, the borrower, are not assuming too much additional debt by taking on a home loan.

The debt-related requirements for Texas FHA loans are somewhat flexible. HUD allows for higher debt ratios in cases where the borrower has “compensating factors,” like extra cash reserves in the bank. Please contact us if you have questions about this or any other FHA loan requirement covered in this article.

FHA Loan Limits in Texas

Lastly, we have loan limits. When using an FHA-insured mortgage to buy a home, you’ll have to meet the loan limit requirements for your particular county. These limits represent the maximum amount you can borrow through this program.

Loan limits can vary from one county to the next, because they’re based on median home values. In 2021, the FHA loan limit for most Texas counties is $356,362. In pricier counties, like those that fall within the Austin metro area, the limit is currently set at $416,300. The Dallas-Fort Worth area has a limit of $416,300 in 2021.

Note: These figures apply to single-family home purchases in particular. There are higher caps for multi-family properties, such as duplexes and triplexes.

Have questions? Trinity Oaks Mortgage offers a wide variety of home loan options, including FHA. Please contact us if you have questions about the FHA loan requirements in Texas, or other mortgage-related topics.

The post FHA Loan Requirements in Texas: Updated for 2021 appeared first on Trinity Oaks Mortgage.

What Are The Different Types of Loans?

There are many different types of mortgage loans, but the most common are government-insured mortgages like FHA, VA, and USDA and those that are not insured by federal agencies such as Conventional and Jumbo loans. Below we will give an overview of these popular options and list a few pros and cons of each loan type to help you identify which type of loan is right best suits you based on your financial situation. As always, it’s best to consult with a mortgage loan officer who will help you choose the mortgage loan that is right for you!

Government Insured Mortgages

There are 3 government agencies that back mortgage loans: the Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veteran Affairs (VA).

FHA loans help make homeownership possible for borrowers who don’t have a large down payment saved up and may not have a strong credit score. You’ll need a minimum FICO score of 580 if you wish to take advantage of the minimum 3.5% down payment, but you can get by with a credit score of 500 if you put down at least 10%. Private Mortgage Insurance (PMI) is required for loans with less than a 20% down payment. FHA loans can be a great option for first-time homebuyers who may not have a large down payment but are ready to move from renting to owning and begin building equity in their homes.

VA loans are designed to provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans). A VA loan is a mortgage that is made by private lenders but partially backed by the Department of Veterans Affairs. While there aren’t limits on how much you can borrow, there are limits on how much the VA will guarantee. For those who meet the eligibility requirements, VA loans can be the key to becoming a homeowner.  These loans do not require a down payment or PMI and can only be used to finance a primary residence.

USDA loans help moderate to low-income borrowers purchase a home in a USDA-eligible area. You must meet certain income limits to qualify. Some USDA loans do not require a down payment for eligible borrowers with low income but keep in mind that a down payment upfront can help lower your monthly mortgage payments saving you money in the long run.

Pros of Government Insured Mortgages

• Credit requirements are more relaxed.
• A large down payment isn’t needed.
• A great option to help you finance your home purchase if you don’t qualify for a conventional loan.
• First-time home buyers and repeat home buyers alike can take advantage of these types of loans.

Cons of Government Insured Mortgages

• Since a smaller down payment (or no down payment) is required for these types of loans, private mortgage insurance is required if you put down less than 20% of the home’s purchase price.
• If you choose a government-insured loan due to a low credit score, your interest rate will be higher than that of a conventional loan with excellent credit.
• The overall borrowing costs may be higher.

Conventional Mortgages

Opposite of government-insured loans, a Conventional loan is not backed by the federal government. Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent. There are two categories of Conventional loans known as conforming and non-conforming. Simply put, a conforming loan falls within the maximum loan limits set by the Federal Housing Finance Agency and a non-conforming loan does not. Learn more about conforming loan limits here.

Pros of Conventional Mortgages

• Borrowing costs tend to be lower than other types of loans.
• Conventional loans can be used to finance primary residences, secondary residences, or investment properties.
• If you put down less than 20% and have PMI, you can ask to cancel the PMI once you have gained 20% equity in your home

Cons of Conventional Mortgages

• You will need to have a FICO score of 620 or higher to qualify for a conventional loan.
• Your debt to income ratio will need to be no more than 45 to 50 percent.
• Significant documentation is required to verify income, assets, down payment, and employment.

Jumbo Mortgages

Since Jumbo loans are non-conforming this means the home’s purchase price exceeds federal loan limits. The loan limit for a single-family home in 2018 was $435,100 in most parts of the U.S. Jumbo loans are more common in areas where home prices are higher and these types of loans make sense for more affluent buyers purchasing a home in this type of area. Borrowers should have good to excellent credit, high incomes, and a substantial down payment.

Pros of Jumbo Mortgages

• You are able to borrow more money to buy a home in a high-cost area.
• Interest rates tend to be competitive for this type of loan.

Cons of Jumbo Mortgages

• A down payment of 10-20% is needed.
• You’ll need a FICO score of 700 or higher (although you may be able to get by with a 660).
• Your debt to income ratio cannot be above 45%.
• You’ll need to prove that you have significant assets in cash or your savings account.

Are you interested in applying for a Home Loan?

Trinity Oaks Mortgage, one of the area’s leading mortgage lenders has vast experience in dealing with many different loan types in Texas. We’re available to answer any questions, help determine if you are eligible, and guide you through the home loan process.

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