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8 Steps to Buying a Home
Jennifer Hernandez • March 9, 2023
Are you thinking about finally buying a home this year? Read on for a complete guide on how to buy a home in eight easy steps.
It may surprise you to learn that, in 2021, 34% of people buying a home were first-time homebuyers. As of December 2022, the average home price in Texas was $331,000 .
If you're looking to buy a home or invest in property, you need to understand the basic steps of purchasing real estate. This will help you prepare your budget and organize important documents so you can secure a mortgage.
Keep reading our complete guide to buying a home in Texas so you can learn the ins and outs of how to buy a home in 2023!
1. Determine Your Budget
Before you look to invest in residential real estate, its important to understand what you can afford and what your monthly budget is. A great start is to refresh your list of monthly expenses for both mandatory and discretionary expenses. I have a great, simple chart for you to do that HERE.
Review carefully your household expenses, and your after tax income deposited every month, so you can be clear what your disposable monies available are for your house payment. A house payment will consist of principal, interest, property tax, insurance and PMI if applicable. It will not include other monthly expenses like utilities or maintenance, and other hidden costs when buying a home .
Start getting referrals to a local Texas lender that you can trust. They'll help you calculate what your monthly payment could be so you can look for potential homes that will meet your budget goals.
2. Get Pre-Approved
For a loan pre-approval, speak to your mortgage lender about how to apply for a loan. Your loan pre-approval will help you determine the monthly mortgage amount you qualify for and what you can expect to pay each month. The mortgage community takes this process very seriously!
Expect to provide paperwork, and have your credit pulled. This will ensure that all aspects are thoroughly reviewed, before you make offers, and have earnest money at risk. Our suggestion is to consider obtaining a valid pre-approval within 6 months or more from when you want to move. This will not only help you have a peace of mind, but will enhance your chances of having a successful home buying experience!
One last important detail to note, is that a pre-qualification differs from an actual pre-approval. Here is a video where I have explained the two differences.
A pre-qualification is a review of credit only, while a pre-approval additionally reviews income, assets and special circumstances. Obtaining a pre-approval letter early will help in your home search, as sellers and realtors view anyone with a pre-approval letter as a serious buyer.
Here are 4 of the most important factors when it comes to getting PRE - APPROVED for a mortgage loan in Texas.
- Your credit - One of the first things that is crucial to pre-approval is to build up your credit score. The lender must verify if you meet the minimum standards for loan programs available to you. Credit score also greatly impacts the final interest rate.
- Your income - The next thing that you will need to get pre-approval is to have proof of your monthly income. Income can be derived from many different sources, depending if you are employed, self employed, or retired. Be prepared to provide pay slips or possibly tax returns to prove income. In addition, a minimum of 2 year history of employment is required. It does not have to be with the same employer or source, but in total work history. There are some exceptions, like if you were in university obtaining a degree.
- Your savings and reserves matter - Savings are another crucial component of the pre-approval process. Verifying that you have funds for closing, and the source of those funds, will be required.
- Your debt to income ratio - Depending on the program you are applying for, there are debt to income ratio requirements that lenders adhere to. This is to make sure that you are not over loaded with monthly payments, and will be able to make your mortgage payment on time.
For a comprehensive guide on everything required for mortgage pre-approval in Texas, visit our guide here. Once you compile these documents, you can work with your lender on applying for a mortgage pre-approval letter for your new home.
>> Here's a handy checklist on the documents required from your lender to get pre-approved. Download the free guide here.
3. Find a Realtor
Realtors play a crucial role in the real estate transaction. Did you know that the realtor's commission is in most cases paid by the seller? Look for a realtor with excellent reviews, a proven track record, and familiarity with the area you want to live in. It's a great idea to ask family and friends for references of realtors they have used in the past.
Once you select a realtor, you'll likely be asked to sign a buyer's representation agreement with them. This agreement means they're the realtor representing you and working in your best interest.
4. Make a List of Likes and Dislikes
As of December 2022, there were over 91,000 home listed for sale in Texas. That's a lot of homes to sort through! Before you begin your search, make a list of likes, dislikes, amenities, etc that you will require.
Imagine your perfect scenario of a dream home. Further your list with negotiables and non-negotiable in those amenities. Consider the safety of the area, local school districts, and access to public transportation if you commute to work.
5. Make Your Offer
Once you work with your realtor and find the perfect home, it's time to put in an offer, which means a proposal, to the seller. In this step, you will offer a price, terms, possible credits to closing costs, and a timeline for closing, to name a few.
You will offer a deposit on the home, also called earnest money. This will be credited at the closing. There is a contingency of time to get the home inspected! That is called an option period.
If the home inspection finds any major issues, you can renegotiate the purchase price with the seller or back out of the transaction. These steps is where your realtor really comes in handy.
Even in 2023, there are many markets that are still seeing multiple offers. To make your offer more attractive to the seller, here are some tips:
- Increase the earnest money. Typically the earnest money used in a mortgage consists of approximately one percent of the price, however by doubling the amount of earnest money used in the transaction, the seller will realize that you are more committed to completing the mortgage transaction. Earnest money will be applied to your total amount due at closing , so consider this a deposit.
- Increase option fee or reduce the option period. The Option Period in which you can do diligence on the property before you buy it. For example, property inspections, or just changing your mind just because! An average time period is 7 to 10 days. By shortening the option period and/or increasing the option fee, this could entice a seller over other offers. It means their property is in this holding pattern for less time.
- Buyer to pay cost of the title policy. In Texas, there is a paragraph in the contract, in which the buyer or seller pay the cost of the title policy. This is a negotiable item, but historically and customarily, most sellers will pay for the title policy. The cost of title is set by the Texas Department of Insurance, and is a set fee based upon the price of the home, which is currently about .6% of the price of the house. By the buyer offering to pay the title insurance, this is more money in the sellers pocket, which could encourage them to consider your offer more seriously.
- Waive your right to terminate due to the appraisal In Texas, the appraisal waiver form is a form that states that the buyer will not terminate the contract if results of the appraisal are less than the purchase price. Here is a video that more thoroughly explains this form.
- Waive financing contingency on the contract this option is a last resort. It is ONLY for those buyers that have been thoroughly through the approval process, and their lender has given blessing to this option. It is a serious matter. It means that you feel very confident about your abilities to perform on final financing for the home purchase. If for any reason, your loan is not approved in final approval, you would lose your earnest money (if you signed this form). Be sure to discuss this option thoroughly with your lender.
6. Seller Accepts the Offer
Once the seller agrees to your offer, it's time to move forward with your loan. From here your lender can initiate the final loan process once they receive the contract agreement.
By this stage you've already been pre-approved for a mortgage, so most of the leg work has already been completed.
Expect at this stage to refresh any paperwork. Documents like paystubs and bank statements must be dated within 30 to 45 days of closing.
Also, if your credit is more than 100 days old, it will need to be pulled again.
7. Home Appraisal and Home Inspection
First, let's define the difference between an appraisal and inspection. A house inspection is where the condition of the house, such as electrical hazards, heating and lighting, and signs for deferred maintenance are inspected.
A home appraisal is an estimated value for the house at its current market value. If you are obtaining a loan, a home appraisal is required. However, a home inspection is optional. Although not required, you should think twice before skipping the inspection process in order to save upfront dollars. This could be the trigger that determines future unseen maintenance and issues with the home.
Here is a video that further describes the differences between a home inspection and a home appraisal.
8. Ready, Set, Close!
Closing day is the most exciting part of the process! This is where all the details come together. First, you should expect that at a minimum of 3 days before closing, your lender is required to issue your closing disclosure.
This is a final itemization of your fees, and cash to close. You will need a cashier check or wire for closing funds. No personal checks, money orders, bitcoin or cash is accepted.
If your are purchasing a primary residence, and are married, your legal spouse, even if separated, is required to sign a few documents at closing. Be sure to discuss this with your lender if there are issues with this step! Have your government issued id ready. Be sure that it is not expired on closing day.
The closing process will normally be held at the title company. Remote closing by notary are likely available, so be sure to discuss this with the title company , your lender, and your realtor weeks ahead of closing day, so that all goes smoothly!
Summary of Buying a Home
Hopefully this information has empowered you with some vocabulary and knowledge on the steps you need to take to buy your next home. Remember that trusted referrals to both realtors and lenders could enhance your buying experience and be sure that you have the best resources available for your important decision.
We would love to help! Loan with Jen is a trusted team of experts since 1995. Helping thousands of home owners just like you! Contact us today to discuss your next step.
Down payment assistance programs (DPAs) sound like a dream come true—free money to help you buy a home! But before you get too excited, there are hidden costs and crucial details you need to be aware of. Let’s uncover the real impact of DPAs so you can decide if they’re the right fit for you. What Are Down Payment Assistance Programs? Down Payment Assistance Programs, or DPAs, are designed to help homebuyers, particularly those with limited income, afford a home. While many of these programs are for first-time buyers, some cater to repeat buyers as well. Here are the key factors to consider: Income Limits: Most DPAs have income restrictions based on your area’s average median income. Credit Score Requirements: Your credit score will need to meet a minimum threshold. Geographic Restrictions: While some programs are available statewide, others are limited to specific locations. Types of Down Payment Assistance Grants – Free money that doesn’t need to be repaid. These are typically reserved for first-time buyers. Forgivable Loans – A second mortgage that is forgiven after you live in the home for a set period (commonly 3, 10, or even 20 years, depending on the program). Deferred Payment Loans – A second lien with no required payments until you sell or refinance your home. This must be repaid when you pay off your first mortgage. Sounds great, right? Well, let’s dive into the hidden costs and fine print you need to be aware of. The Hidden Costs of Down Payment Assistance 1. Higher Interest Rates Most DPAs come with a higher interest rate compared to conventional financing. This means you could be paying thousands more in interest over the life of your loan. While some programs offer competitive rates, qualifying can be more difficult. 2. Increased Closing Costs In addition to a higher interest rate, many DPAs come with additional fees, such as: State Administration Fees: These can range from $500 to $600. Origination Fees: Some lenders charge a percentage of the loan to access the program. Before committing to a DPA, compare a loan estimate with and without assistance to see the true cost side by side. 3. Restrictions on Occupancy Many DPAs require you to live in the home as your primary residence for a set period. If you decide to rent it out, you could be required to pay back the assistance in full. 4. Income and Location Restrictions Most programs have income caps based on your area’s median income. If your income exceeds the limit, you won’t qualify. Some programs also require you to buy in specific areas. 5. Recapture Tax (Resale Requirements) Some programs include a recapture tax , meaning if you sell your home for a profit, the program can claim a portion of that profit as repayment for the assistance. This can be a significant financial setback if you weren’t expecting it.
Dreaming of owning a home but haven’t saved up for a down payment? You’re not alone—and good news: there are options for you! In this post, we’ll break down four powerful ways to buy a home with little or no money down —plus, a few key mistakes to avoid that could cost you thousands. These are real strategies we use with buyers every single month. 1. USDA Loans – For Rural Buyers The USDA loan program, which is backed by the United States Department of Agriculture , offers 0% down financing for eligible properties and borrowers. The catch? There are income and geographic restrictions . Good for : Rural or suburban buyers outside city limits Down payment : $0 Bonus : Lower mortgage insurance than FHA Check if a property qualifies for USDA Watch this video : Understanding USDA Loans with Jen 2. VA Loans – For Veterans and Their Families If you’re a veteran or the surviving spouse of a veteran, the VA loan offers a $0 down path to homeownership—with no mortgage insurance and loans available up to $2 million ! Good for : Active military, veterans, or qualified spouses Down payment : $0 Bonus : Flexible credit guidelines and competitive rates Watch this video : How VA Loans Work 3. Down Payment Assistance (DPA) If USDA or VA don’t fit your situation, down payment assistance programs (DPAs) might be your best option. These programs are provided at the state, county, or city level , and they can cover some or all of your down payment and/or closing costs. Good for : First-time and repeat buyers with limited savings Down payment : Partial or full assistance Bonus : Can sometimes be combined with seller credits Texas buyers, check out: 🔗 My First Texas Home Program 🔗 Texa s State Affordable Housing Corporation (TSAHC) Video breakdown : Down Payment Assistance Explained 4. Gift Funds – From Family or Close Friends Did you know you can receive money as a gift to help with your down payment? That’s right. FHA, VA, USDA, and Conventional loans all allow gift funds on primary residence purchases. But before you make a huge cash deposit, make sure you talk with your lender about how to document the gift. Good for : Buyers with supportive family Down payment : Fully or partially covered by gifts Note : Must be properly documented with a gift letter and proof of transfer Learn more : How to Use Gift Funds
Your credit score is the key to unlocking your financial future. Understanding how it’s calculated can help you make better financial decisions and avoid costly mistakes. Many people find their credit score to be a mystery—sometimes it drops even when they make payments on time! If you've ever been frustrated by fluctuations in your score, this guide will break down the five key components of your credit score so you can take control and boost it effectively. Why Your Credit Score Matters Your credit score is a three-digit number that reflects your financial responsibility to creditors. It affects everything from securing a mortgage or auto loan to getting approved for credit cards and even determining your interest rates. The better your score, the more favorable your loan terms— lower interest rates, smaller deposits, and better financial opportunities . In fact, 90% of lenders use FICO scores as their primary credit evaluation tool ( source ). But how exactly is your FICO score calculated? Let’s break it down. The 5 Components of Your Credit Score 1. Payment History (35%) – Never Pay Late! Your payment history is the most important factor in your credit score. It includes: On-time vs. late payments (payments that are 30+ days late are reported to credit bureaus) Collections and charge-offs Bankruptcies or foreclosures 🔹 Pro Tip : Always pay at least the minimum payment by the due date. Setting up auto-pay can help prevent accidental late payments. If you’re struggling, reach out to creditors to discuss payment plans before you fall behind. 📌 More on improving your payment history: How Late Payments Affect Your Credit Score 2. Credit Utilization (35%) – Keep Your Balances Low Your credit utilization ratio refers to the percentage of available credit you’re using. High utilization can hurt your score, even if you pay your balance in full each month! 🔹 Best Practice : Keep your credit card balances between 10-30% of your credit limit. For example, if you have a $5,000 limit, don’t carry a balance higher than $1,500 at any time. 🔹 Secret Tip : Your balance is reported to the credit bureaus on your statement closing date , NOT when you make a payment. If you pay your credit card bill before the statement closing date, you can lower the reported balance and improve your utilization ratio. 📌 More on credit utilization: Mastering Your Credit Score 3. Length of Credit History (15%) – The Longer, the Better Credit bureaus consider how long your accounts have been open. Older accounts demonstrate stability and reliability . 🔹 Best Practice : Avoid closing old credit accounts, even if you don’t use them often. Keeping them open helps maintain your average account age . 📌 More on the importance of credit history: How are Credit Scores Made? 4. New Credit & Inquiries (10%) – Be Careful with Hard Pulls Every time you apply for credit, a hard inquiry is recorded on your report, which can slightly lower your score. Applying for multiple credit accounts in a short time signals to lenders that you may be in financial trouble. 🔹 Best Practice : Keep new credit applications to a minimum and only apply when necessary. 🔹 Good to Know : Soft inquiries (like checking your credit score on your own) do not affect your credit score! 📌 More on credit inquiries: Does a Hard Enquiry Damage My Credit Score? 5. Credit Mix (10%) – Variety Matters Having a healthy mix of credit types boosts your score. Lenders like to see that you can manage different types of credit responsibly . A strong credit mix includes: Installment loans (e.g., mortgages, auto loans, student loans) Revolving credit (e.g., credit cards, home equity lines of credit) 🔹 Best Practice : If you only have one type of credit, consider adding another responsibly (e.g., opening a credit card if you only have loans). 📌 More on credit mix: How Your Credit Mix Affects Your Score
Does a Hard Inquiry on Your Credit Really Hurt Your Score? If you're planning to buy a home in Texas, you may be wondering: Does a hard inquiry on your credit really damage your score, and how will it affect your chances of mortgage approval? Let's break down what a hard inquiry is, how it impacts your credit, and strategies to minimize its effect so you can confidently move forward with your home purchase. What is a Hard Inquiry? A hard inquiry occurs when a lender checks your credit report to assess your creditworthiness for a loan, credit card, auto loan, or mortgage. Unlike soft inquiries (which happen when you check your own credit or when a lender pre-qualifies you without a formal application), hard inquiries are recorded on your credit report and may impact your credit score. Inquiries remain on your credit report for up to two years , but the good news is that FICO scoring models (used by 90% of lenders) only consider them for one year. This means that while the inquiry stays visible on your report, its impact on your score diminishes after 12 months. How Hard Inquiries Affect Your Mortgage Approval A hard inquiry alone is unlikely to prevent you from getting pre-approved for a mortgage. However, here’s what you need to know: FICO Treats Multiple Mortgage Inquiries as One: If multiple mortgage lenders pull your credit within a 30-day window , it only counts as one inquiry for scoring purposes. This allows you to shop for the best mortgage rates without penalty. Other Inquiries Can Hurt Your Score: While mortgage inquiries are grouped together, applying for credit cards, auto loans, or personal loans during the same time frame can lower your score. Impact Depends on Your Existing Credit Score: If your credit is already strong (e.g., 700+ score ), a hard inquiry may have a minimal effect—think of it as a small “peck” on a steel building. However, if your credit is already struggling, an additional inquiry could have a more noticeable impact. 👉 For a deeper dive into credit scores and mortgages, check out Loan with Jen’s guide on mortgage pre-approvals .
Did you know that paying off a collection won’t help your credit score unless it gets deleted ? That’s right! Collections don’t automatically disappear from your credit report, even if you’ve settled the debt. If you’re planning to buy a house or improve your credit, removing collections can be a game-changer. In this guide, I’ll walk you through six proven steps to delete collections from your credit report forever , plus a bonus hack that might speed up the process. Follow these steps carefully, and you could see your credit score improve significantly! Why Collections Hurt Your Credit Score A single collection—whether it’s $10 or $5,000 —can drop your credit score by 100 points or more overnight. Your credit score affects more than just home loans. It impacts: Your ability to qualify for a mortgage Your interest rates on car loans and credit cards The deposit amount for utilities like electricity and internet Having a collection on your report can cost you thousands of dollars in extra interest over time. That’s why it’s crucial to remove them the right way . Step 1: Get Your Full Credit Report Before you start, you need to know exactly which collections are reporting and to which credit bureaus . Where to pull your credit report: AnnualCreditReport.com (Free once per year) MyFICO.com (Paid but gives accurate FICO scores, which mortgage lenders use) Pro Tip: Make sure you get reports from all three bureaus ( Experian, TransUnion, and Equifax ) since not all creditors report to every bureau. Step 2: Identify the Collections & Calculate Your Offer Once you have your report, write down all open collections (not charge-offs). Keep track of: Collection company name Amount owed Contact phone number Now, add up the total amount owed and calculate 50% of that number . This will help you negotiate later. For example: If your collections total $2,000 , set aside $1,000 for settlements. Having funds ready before negotiating gives you leverage to settle immediately when the time comes. Step 3: Research the Collection Agency Not all collection agencies have the same policies. Look up the collection company online to see if they offer Pay-for-Delete (PFD) agreements. This means they will remove the collection once you pay . If the company is PFD-friendly, mark them as a priority! Step 4: Call the Collection Agency & Negotiate This is where your sweet voice comes in! Be polite, professional, and never argue . Follow these steps: Call the collection agency directly (no emails or texts!). Ask for a settlement : Start by offering 20-25% of the balance. Negotiate : If they counteroffer, work towards 50% or less . Ask for Pay-for-Delete : Say, "If I settle today, will you delete this from all three bureaus?" Get it in writing : Before paying, request a written agreement confirming deletion . If they refuse Pay-for-Delete , do not pay . Keep calling back until you get an agent who will agree. Step 5: Make Your Payment & Track It Once you receive a written confirmation , pay the settlement amount using a traceable method like: Credit/debit card Online payment portal (if available) Check or money order (with proof of payment) After paying, follow up with the collection agency to confirm when they will notify the credit bureaus. Most agencies report once per month , so expect deletion to take 30-90 days .
This information could save you thousands of dollars. Not all credit scores are FICO scores, and to complicate things even further, there are over three dozen versions of FICO ! If you’re planning to buy a home soon and are concerned about your credit score, keep reading—I’m breaking down the real facts. No fluff, just the essential details you need to know. The Credit Score Surprise As a mortgage loan officer with nearly three decades of experience , I’ve seen it all. Every week, I ask new clients what they think their credit score is. Without fail, the number they provide is different from the actual score I pull. Sometimes it’s just a few points off, but I’ve also seen differences of 100 points or more ! Why does this happen? Credit scores are highly individualized, and not all scores are calculated the same way. Here’s the good news—I’ve been pulling credit reports since mortgage companies began using FICO scores. I’ve learned how to navigate this complicated world, and I’m here to share what you need to know. What Is a FICO Score?
If you’re planning to buy a home in the next 12 months, understanding your credit score is essential. Not all lenders use the same credit scoring system, and the score you see from your credit card company may differ significantly from what mortgage lenders use. About 90% of lenders rely on FICO scores , but what exactly is FICO, and why is it so important? In this post, we’ll take a journey through the history of FICO and credit reporting, explain why not all credit scores are created equal, and give you practical tips to improve your credit score for home buying success. What Is FICO, and How Did It Start? To understand FICO, we need to take a step back into history. FICO (Fair Isaac Corporation) wasn’t always the gold standard for credit scoring. Its roots go back to 1956 as a data analytics company that specialized in building algorithms for various industries. But credit reporting actually started before FICO got involved, it began much earlier—back in the 1800s . The Birth of Business Credit Reporting In 1841 , a company called The Mercantile Agency began collecting and recording data on businesses, providing valuable information to creditors. This company later rebranded as Dun & Bradstreet , which remains a major player in business credit reporting today. While businesses were being tracked and scored, there was no system in place for consumer credit. That changed in the early 1900s . The Evolution of Consumer Credit Reporting In Atlanta, The Retail Credit Company (RCC) emerged in the early 1900s, collecting extensive data on individual consumers. Unfortunately, they went too far—gathering private personal information, including political affiliations and even racial and sexual details. The U.S. government stepped in to regulate this overreach by enacting the Fair Credit Reporting Act (FCRA) in 1970 , which established rules on how consumer credit information could be collected and shared. Feeling the heat from the new regulations, RCC rebranded as Equifax , one of the three major credit bureaus we recognize today, along with TransUnion and Experian . By the late 1980s , these agencies were struggling to make sense of the growing mountain of credit data. They needed a standardized system to interpret creditworthiness—so they partnered with FICO . How FICO Became the Standard for Credit Scoring In 1989 , FICO introduced its credit scoring system, which quickly became the industry standard for evaluating credit risk. FICO’s algorithm turned complex credit data into a simple three-digit score, making it easier for lenders to assess borrowers' trustworthiness when it came to paying back debt. Today, FICO is used by about 90% of lenders , although there are dozens of FICO models , each tailored to different types of lending (e.g., auto loans, credit cards, and mortgages). Why Your FICO Score May Vary If you’ve ever checked your credit score online and then applied for a mortgage, you might have noticed a significant difference between the two numbers. That’s because not all credit scores are created equal. There are more than three dozen versions of FICO , and each one serves a different purpose. For example: FICO Auto Score is used by auto lenders to determine your car loan eligibility. FICO Bankcard Score is used by credit card companies. FICO Mortgage Score is used specifically by mortgage lenders. Each version uses a slightly different algorithm to weigh factors like payment history, credit utilization, and length of credit history. Mortgage lenders typically use the most recent version of FICO, which can result in a lower score compared to what you see on consumer credit apps. Getting the new FICO scoring into a company’s system is costly, so when you are getting a free credit report, you are most certainly not getting the most up-to-date and accurate credit score. Companies just can’t afford to give the score away for free.
If you’re planning to buy a home, one of the most important questions on your mind is probably: What credit score do I need to qualify for a mortgage? I’m here to save you hours of research and give you the real facts that matter most. We’ll cover the minimum credit score requirements for various loan types, from conventional to FHA, VA, USDA, and portfolio loans. Plus, read to the end for a bonus tip on how to boost your credit score by 40 to 50 points—fast! Understanding Credit Scores for Mortgages Not all credit scores are created equal. While you may see one score when checking your credit card or car loan, the FICO score used for mortgages could be different. There are over three dozen FICO models, but 90% of lenders rely on one specific version for mortgages. 💡 Pro Tip: The best way to know your mortgage FICO score is to check with a licensed mortgage lender. Minimum Credit Score Requirements by Loan Type
Are you exploring loan options and wondering if an FHA loan might be right for you? If you need leniency on credit, higher debt-to-income ratios, or have faced past credit challenges like bankruptcy or foreclosure, an FHA loan could be the key to achieving your homeownership dreams. Let’s unpack the details of FHA loans, including the latest 2025 updates, their unique benefits, and factors to consider. What Is an FHA Loan? FHA stands for the Federal Housing Administration, a government-backed entity that has been making homeownership more accessible since 1934. During its inception, only 1 in 10 people were homeowners. Today, that number has risen to 6 in 10, thanks in part to initiatives like FHA loans. FHA loans are designed to help borrowers with less-than-perfect credit or other financial challenges qualify for home financing. Every year, FHA adjusts its loan limits based on home value trends, providing a flexible and accessible option for buyers nationwide. FHA Loan Limits for 2025 In 2025, FHA loan limits have increased by approximately 5-6%, reflecting rising home prices across the country. For a one-unit property, the baseline limit is $524,225. However, limits can go much higher in high-cost areas like California, New York, and New Jersey. In these regions, FHA loans can reach up to $1,209,000 for a one-unit property. If you’re curious about the FHA loan limit in your county, use this handy lookup tool . FHA also allows financing for two, three, or four-unit properties with higher limits. This makes it a versatile choice for those interested in multi-family homes.