FHA loans have been around since 1934. Ninety-two years. And somehow, in 2026, people are still getting the basics wrong.
I hear the same myths every week from homebuyers in Fort Worth, Austin, Houston, and across Texas. "FHA is only for first-time buyers." "You need a 580 credit score." "The mortgage insurance never goes away." Some of these are half-truths. Some are flat wrong. And all of them are costing people money or keeping them out of homes they could actually afford.
I'm Ben Eddy with Colt Lending, a mortgage broker serving Texas, Oklahoma, and Tennessee. I close FHA loans regularly, and I want to set the record straight on what this program actually is, what it isn't, and the Texas-specific rules that most loan officers don't even know about.
Let's kill these myths one at a time.
Myth #1: FHA Loans Are Only for First-Time Homebuyers
This is the most common myth, and it's completely false.
FHA loans are available to anyone who qualifies — first-time buyer, second-time buyer, fifth-time buyer. There is no requirement that you've never owned a home before. The only occupancy requirement is that the property must be your primary residence.
The confusion probably comes from the fact that a large percentage of FHA borrowers happen to be first-time buyers. That makes sense — FHA's lower down payment and more flexible credit requirements naturally attract people buying their first home. But correlation isn't a rule. If you've owned three homes and want to buy a fourth using FHA because the terms fit your situation, you absolutely can.
I've helped repeat buyers in DFW and Austin use FHA because it was the smartest financial option for their situation — not because they had no other choice, but because the numbers worked better than conventional.
Myth #2: FHA Has a Minimum Credit Score of 580
This is one of the most widely repeated pieces of misinformation in the mortgage industry. FHA itself does not set a minimum credit score. Period.
What FHA does is establish two tiers for down payment requirements: if your score is 580 or above, the minimum down payment is 3.5%. If your score is between 500 and 579, the minimum is 10%.
The "580 minimum" that everyone talks about? That's a lender overlay — an internal rule that individual lenders impose on top of FHA's actual guidelines. Many retail banks and direct lenders set their overlay at 620 or even 640 for FHA. That's their decision, not FHA's.
As a broker, I have lenders in my network that go down to 500. Not every lender will, but some will. That's the advantage of shopping across 100+ wholesale lenders — when one lender's overlay shuts the door, another lender's guidelines open it. Same FHA program, same HUD rules, different answer depending on who you ask.
If a loan officer told you that you don't qualify for FHA because your score is below 580, that loan officer couldn't help you. It doesn't mean FHA couldn't.
Myth #3: FHA Mortgage Insurance Never Goes Away
This one is partially true, which is what makes it so effective as a myth. The reality is more nuanced than most people explain.
If you put down less than 10% on an FHA loan — which is most FHA borrowers, since the whole point is the 3.5% minimum — the annual mortgage insurance premium (MIP) stays for the life of the loan. That part is true. You cannot call up your servicer and ask them to remove it the way you can with PMI on a conventional loan.
But if you put down 10% or more, the MIP drops off after 11 years.
And here's what most articles leave out: you are not stuck with FHA MIP forever even if you put down 3.5%. The most common exit strategy is refinancing into a conventional loan once you've built 20% equity. Home appreciation plus your principal payments can get you there in 3-5 years in many Texas markets. At that point, you refinance into conventional, drop the mortgage insurance entirely, and potentially get a better rate if your credit has improved.
I set up this plan with my FHA clients from day one. FHA is often the right tool to get into the home. It doesn't have to be the tool you keep for 30 years.
Now — here's a critical distinction that gets confused constantly: FHA has MIP. Conventional loans have PMI. These are different things with different rules. PMI on a conventional loan can be canceled once you reach 20% equity. MIP on an FHA loan follows the rules above. When someone says "you can request mortgage insurance to be removed," they're talking about conventional PMI, not FHA MIP. Don't mix these up.
Myth #4: FHA Appraisals Are Impossible to Pass
FHA appraisals are more thorough than conventional appraisals, yes. The appraiser checks for health and safety issues — peeling paint, missing handrails, faulty wiring, water damage, roof condition. But "more thorough" doesn't mean "impossible."
The vast majority of homes in reasonable condition pass an FHA appraisal without issues. The appraiser is looking for habitability, not perfection. Cosmetic issues — outdated kitchens, ugly carpet, dated fixtures — don't fail an FHA appraisal.
When issues do come up, they're usually minor repairs that the seller can address before closing. Peeling exterior paint, a broken window, a missing handrail on exterior steps — these are common FHA appraisal conditions, and they're typically inexpensive to fix.
I've closed FHA loans on homes across Fort Worth, Leander, Georgetown, and Houston. The appraisal process doesn't slow things down when you set expectations upfront and work with a real estate agent who understands FHA guidelines.
Myth #5: FHA Loans Take Longer to Close
This myth persists from a decade ago when FHA processing was genuinely slower at some lenders. In 2026, with the right lender and a complete file, an FHA loan closes in the same 30-45 day window as a conventional loan.
The underwriting process is essentially the same. The appraiser is often the same person who does conventional appraisals. The title work, the closing process, the documentation — all the same timeline.
What can slow down any loan — FHA or conventional — is an incomplete file, a borrower who takes weeks to submit documents, or a lender with bad systems. That's not an FHA problem. That's a lender problem.
Myth #6: Sellers Won't Accept FHA Offers
This is a market-dependent concern, not a universal truth. In a hyper-competitive market where sellers receive 10 offers in a weekend, some listing agents historically preferred conventional offers because they assumed FHA would be more complicated.
But in today's Texas market — which is more balanced than the 2021-2022 frenzy — FHA offers are accepted regularly. Sellers in Fort Worth, DFW, Austin, and Houston are seeing fewer multiple-offer situations, and a strong FHA offer with a solid pre-qualification letter from a reputable broker is competitive.
The key is how your offer is presented. A well-documented pre-qualification from a broker who's already vetted the borrower across multiple lenders carries weight. Listing agents want to know the deal will close. Your job — and your mortgage professional's job — is to prove that it will.
Myth #7: You Can Do an FHA Cash-Out Refinance in Texas
This is the myth that even some loan officers get wrong. And it matters if you're a Texas homeowner.
In most states, FHA cash-out refinances are available and widely used. If you're in Oklahoma or Tennessee — two other states where I'm licensed — you can do an FHA cash-out refinance. No issue.
But in Texas, you cannot. Section 50(a)(6) of the Texas Constitution governs home equity lending and prohibits cash-out refinances on government-backed loans, including FHA and VA. This is a Texas-specific constitutional restriction, not an FHA rule.
If you're a Texas homeowner with an FHA loan and you want to access your home equity through a cash-out refinance, you'll need to use a conventional loan. Texas cash-out refinances are limited to 80% loan-to-value, and lender fees are capped at 2% of the loan amount.
This catches a lot of Texas homeowners off guard. They read an article about FHA cash-out refinancing, assume it applies to them, and then find out mid-application that Texas law says no. If your loan officer didn't tell you this upfront, they either don't know Texas law or they weren't paying attention.
For my clients in Oklahoma and Tennessee, FHA cash-out is on the table. For Texas clients, we plan around the state's rules from the start.
Myth #8: FHA Loans Are Only for Cheap Houses
FHA loan limits vary by county, and in many Texas markets, the limits are higher than people expect.
For 2026, FHA loan limits in Texas range from $541,287 in most counties to $571,550 in higher-cost areas like Travis County (Austin), and up to $563,500 in Dallas County. Some counties in the DFW metro have limits that go even higher.
On a $541,287 loan with 3.5% down, you're buying a home priced around $560,000. That covers the majority of homes sold in the Fort Worth, Austin, and Houston markets. FHA isn't limited to starter homes — it covers a wide range of the Texas housing market.
And if you're buying in a higher-cost area where prices exceed FHA limits, that's where conventional or jumbo loans come in. But don't assume FHA can't cover the price range you're looking at without checking the limits for your specific county first.
Myth #9: FHA Rates Are Higher Than Conventional Rates
This is actually backwards in many cases. FHA interest rates are frequently lower than conventional rates, especially for borrowers with credit scores below 720.
Why? Because the FHA's mortgage insurance protects the lender from default risk, which allows them to offer more competitive base rates. On a conventional loan, the lender takes on more risk with lower-credit borrowers and compensates with higher rates and loan-level price adjustments.
For borrowers in the 580-680 credit score range, FHA rates are often significantly better than conventional. Even in the 680-720 range, FHA can be competitive once you factor in the LLPA adjustments that conventional loans add at those score levels.
The trade-off is the MIP. FHA rates might be lower, but you're paying mortgage insurance that doesn't automatically cancel. The total cost comparison — rate plus MIP vs. rate plus PMI vs. rate with no insurance — is the calculation that matters. I run both scenarios side by side for every client in this range.
Myth #10: You Can't Buy a Multi-Unit Property With FHA
Wrong. FHA allows financing for 2-unit, 3-unit, and 4-unit properties — as long as you live in one of the units as your primary residence.
This is one of the most powerful and underused features of FHA. You can buy a duplex with 3.5% down, live in one unit, and rent out the other. The rental income from the other unit can even help you qualify for the loan.
FHA loan limits increase for multi-unit properties. In most Texas counties for 2026, the limit for a 2-unit property is $693,050, a 3-unit is $837,700, and a 4-unit is $1,041,125.
For buyers in Fort Worth, Houston, or Austin who want to start building wealth through real estate while living in the property, FHA on a multi-unit is one of the lowest-barrier entry points available.
The Bigger Picture: FHA Is a Tool, Not a Label
FHA isn't a "bad credit loan." It's not a "beginner loan." It's not a "last resort." It's a tool — one of several in the mortgage toolbox — and for many Texas buyers, it's the best tool for the job.
The borrowers I work with who use FHA aren't settling. They're being strategic. They're using a program that lets them buy now with less money down, build equity in a Texas market that continues to appreciate, and refinance into conventional when the timing is right.
The key is working with someone who understands all the options, can compare FHA against conventional for your specific scenario, and knows the Texas-specific rules that most national websites don't mention.
That's what I do every day for buyers across Fort Worth, DFW, Austin, Leander, Georgetown, Houston, and throughout Texas, Oklahoma, and Tennessee.
Want to know if FHA is the right move for your situation? I'm Ben Eddy with Colt Lending — I compare FHA and conventional side by side for every client so you make the decision based on real numbers, not myths. Serving Fort Worth, DFW, Austin, Leander, Georgetown, Houston, and all of Texas, Oklahoma, and Tennessee. Schedule a call and let's run your scenario.
