What is the difference between FHA One-Time Close and FHA 203(k)?

The FHA One-Time Close (OTC) is for building a brand-new home from the ground up — one loan covers construction and permanent financing with a single closing. The FHA 203(k) is for buying and renovating an existing home — it wraps the purchase price and renovation costs into one FHA loan. If you're building new, you want the OTC. If you're buying a fixer-upper, you want the 203(k).

What credit score do I need for an FHA construction loan in Texas?

You need a minimum 580 credit score to qualify for the 3.5% down payment option on an FHA One-Time Close loan. Scores between 500 and 579 may qualify with 10% down. The FHA 203(k) has the same thresholds. Some lenders impose overlays requiring 620+, which is why shopping multiple lenders matters.

How much down payment is required for an FHA construction loan in Texas?

Just 3.5% down with a 580+ credit score. That down payment can come from gift funds from a family member or an approved Texas down payment assistance program — meaning you could potentially build your home with very little out of pocket.

What are the FHA loan limits for construction loans in Texas?

FHA loan limits vary by Texas county and are updated annually by HUD. Limits apply to the total project cost — land, construction, and any required fees. Higher-cost areas like Travis County (Austin) carry higher limits than standard counties. Contact us for your specific county's current limit.

Can I use an FHA construction loan to build on my own land in Texas?

Yes — if you already own land in Texas, its appraised value can often be counted as your equity contribution toward the down payment. This means Texas landowners can sometimes qualify with little to no additional cash down. The land must be free of liens or have minimal outstanding balance.

How does the FHA One-Time Close process work in Texas?

You apply and get approved before construction begins. Once approved, your builder draws funds in stages as construction progresses (called draw schedules). You make interest-only payments during construction. When your home is complete and passes FHA inspection, the loan automatically converts to your permanent 30-year mortgage — no second closing, no second set of closing costs.

What Texas builders can I use with an FHA construction loan?

Texas does not require state-level contractor licensing for general contractors and homebuilders. Your builder must be insured, FHA-registered, and approved by your lender. We maintain relationships with FHA-approved builders throughout Texas. If you have your own builder in mind, we can review their documentation and help get them approved.

What is an FHA 203(k) loan and who is it for in Texas?

The FHA 203(k) loan lets you buy a Texas home that needs repairs or renovations and finance the purchase price plus renovation costs in one FHA loan. There are two versions: the Standard 203(k) for major structural work (minimum $5,000 in repairs) and the Limited 203(k) for cosmetic upgrades up to $35,000. It's ideal for buyers targeting older Texas homes, foreclosures, or fixer-uppers in desirable neighborhoods.

How long does an FHA construction loan take to close in Texas?

Initial approval typically takes 7–14 business days. The full construction phase in Texas averages 6–12 months depending on your builder's timeline, market conditions, and local permitting. Once construction is complete, the loan converts to permanent financing automatically — there's no second closing delay.

🏠 FHA Construction Loan | Serving Texas

FHA Construction Loan Texas — Build Your Home with 3.5% Down

Build a brand-new Texas home or renovate an existing one using government-backed FHA financing. One closing. One loan. As little as 3.5% down with a 580+ credit score. Adam and his team shop multiple lenders to find your best rate — we work for you, not a bank.

3.5%

Min. Down Payment

580

Min. Credit Score

Closing — Not Two

Texas-Licensed

LET’S TALK

Free consultation · No obligation · No upfront credit check

📋 On This Page

🏗️ FHA Construction Loan Texas

What Is an FHA Construction Loan?

An FHA construction loan is a government-backed mortgage that lets you finance the construction of a new home — or the renovation of an existing one — and convert it into a permanent mortgage, all with a single application and one closing. You get the lower down payment and flexible credit standards FHA is known for, applied to the process of building your Texas home from the ground up.

Traditional home purchases are straightforward: you find a home, get a loan, close. Construction is different — money gets released in stages as your builder completes work, and conventional lenders often require two separate closings (one for the land and construction phase, another for the permanent mortgage). FHA’s One-Time Close program eliminates that second closing entirely, saving you time and thousands in duplicate closing costs.

Why Texas Buyers Are Choosing FHA Construction Loans in 2026

Texas home inventory in many markets remains tight. Build-on-your-land and new construction communities are giving buyers more options — and FHA’s low down payment requirement makes building attainable for households that couldn’t qualify for jumbo construction financing. With Texas land prices still reasonable outside the major metros, an FHA construction loan at 3.5% down is one of the most accessible paths to homeownership in the state right now.

Texas family in their new home built with an FHA construction loan

From blueprints to backyard — FHA construction loans make Texas homebuilding accessible

📋 Two Programs

FHA One-Time Close vs. FHA 203(k) — Which Is Right for You?

FHA offers two distinct construction loan programs. The right choice depends on one question: are you building new, or buying and renovating?

🏗️

FHA One-Time Close (OTC)

For: Building a brand-new home

Finances land + construction + permanent mortgage
Single application, single closing
Interest-only payments during build
Auto-converts to 30-yr mortgage at completion
Works on your lot or builder’s lot
580+ credit score / 3.5% down
Loan limits vary by Texas county

Best for: New construction, build-on-land, custom homes

🔨

FHA 203(k) Renovation Loan

For: Buying & renovating an existing home

Wraps purchase + renovation into one FHA loan
Standard 203(k): $5,000+ structural work
Limited 203(k): up to $35,000 cosmetic fixes
Works on foreclosures, fixer-uppers, older homes
HUD-approved consultant manages draw releases
580+ credit score / 3.5% down
Renovation must be complete within 6 months

Best for: Fixer-uppers, foreclosures, older Texas neighborhoods

Feature	FHA One-Time Close	FHA 203(k)
Purpose	New construction	Buy + renovate existing
Min. Down Payment	3.5% (580+ credit)	3.5% (580+ credit)
Number of Closings	1 (saves $3K–$6K)	1
Loan Limits	Vary by county	Vary by county
Property Type	New build (primary res.)	Existing home (primary res.)
Builder Required	FHA-approved & insured	Insured contractor
Own Land Eligible	✓ Yes — counts as equity	N/A

🏗️ FHA Construction Loan Texas

Not Sure Which FHA Program Fits Your Build?

We’ll review your situation — your land, your builder, your credit — and map out the exact program that gets you the keys. No upfront credit check. No obligation.

LET’S TALK

📊 Qualification Criteria

FHA Construction Loan Requirements in Texas

FHA’s guidelines are more flexible than conventional construction financing — that’s the whole point. Here’s what lenders look at when you apply.

🎯 Credit Score

580+ → 3.5% down
500–579 → 10% down
Below 500 → not eligible
Some lenders require 620+ (we shop to find 580-friendly lenders)

💰 Down Payment

3.5% of total project cost
Gift funds 100% allowed
TX down payment assistance eligible
Owned land may count as equity

📋 Debt-to-Income

Max 43% DTI (standard)
Up to 50% with compensating factors
Both W-2 and self-employed eligible
2 years employment history preferred

🏠 Property Rules

Primary residence only
Single-family or 2–4 unit
Must meet FHA Minimum Property Standards
FHA appraisal required at completion

🔨 Builder Requirements

Texas does not require state-level GC licensing
Lender approval and adequate insurance required
FHA-registered builder
Fixed-price construction contract required

📅 Credit History

Chapter 7 BK: eligible 2 yrs post-discharge
Chapter 13 BK: eligible 1 yr into plan
Foreclosure: eligible 3 yrs after
No open collections required

FHA Loan Limits — Texas

FHA loan limits for construction loans are set annually by HUD and vary by Texas county. Limits cover the total project cost — land purchase, construction, and required soft costs.

Standard counties: Most Texas counties use the FHA national floor limit
Higher-cost counties: Travis County (Austin) and select metro counties carry elevated limits
2–4 unit limits: Higher than single-family in every county

Limits change annually. Contact us for your specific Texas county’s current FHA loan limit →

⚙️ Step-by-Step

How the FHA One-Time Close Process Works in Texas

Here’s the exact process from your first call to your first night in your new Texas home — simplified so you know what to expect at every stage.

Initial Consultation & Pre-Qualification

We review your credit, income, and build plans — no credit pull required upfront. You’ll know within minutes what you qualify for and which FHA program fits your situation. We also identify any Texas down payment assistance you may be eligible for.

Builder Selection & Construction Contract

Texas does not require state-level licensing for general contractors and homebuilders, so our builder verification process is critical. Your builder must be FHA-registered, insured, and lender-approved. If you have a builder in mind, we’ll review their credentials quickly. You’ll need a fixed-price construction contract before the appraisal can be ordered.

FHA Appraisal — Based on Plans & Specs

Unlike a standard home appraisal, this one values your home based on construction plans and comparable completed homes in the area — no home exists yet. This establishes the loan amount. The FHA appraisal also confirms the plans meet FHA Minimum Property Standards.

Underwriting & Loan Approval

Full loan underwriting reviews your complete file — income, assets, credit, appraisal, and construction contract. This is where the lender formally approves your loan before a single shovel hits the ground. Timeline: typically 7–14 business days with a complete file.

Closing — One Time Only

You close once, before construction begins. Both the construction loan and permanent mortgage are locked in at this single closing. Your interest rate is set. Construction draws begin flowing to your builder based on completed milestones inspected by the lender.

Construction Phase — Draw Schedule

As your builder completes milestones (foundation, framing, rough-in, drywall, completion), funds are released through 4–5 inspected draws. You pay interest only on the amount drawn — not the full loan amount — keeping your monthly payment low during construction. Texas builds typically take 6–12 months.

Certificate of Occupancy → Your Home

When construction is complete and the home passes FHA’s final inspection and receives a Certificate of Occupancy, your loan automatically converts to your permanent 30-year FHA mortgage. No second closing. No new paperwork. You get your keys and move in.

Modern Texas home under construction — FHA One-Time Close loan draw schedule

Draw funds release in stages as your Texas builder hits each construction milestone

🗺️ Texas Markets

Where Texas Homebuyers Are Building with FHA Construction Loans

We originate FHA construction loans across all of Texas. These are the markets where we’re seeing the most activity from buyers choosing to build rather than buy existing homes.

Greater Houston

Pearland, Katy, Conroe, League City, Sugar Land, The Woodlands — all active FHA construction markets with available lots and FHA-eligible builders.

Dallas-Fort Worth

McKinney, Frisco, Prosper, Celina, Mansfield, Arlington — DFW new construction communities are building in the FHA loan limit range.

San Antonio

New Braunfels, Seguin, Universal City, Schertz, Boerne — build-on-land opportunities around Joint Base San Antonio make FHA OTC a natural fit.

Austin Area

Georgetown, Pflugerville, Buda, Kyle, Liberty Hill — Austin’s metro outskirts offer land and builders within Travis County’s higher FHA limits.

Central Texas

Killeen, Temple, Waco, Belton — military families near Fort Hood and Waco area buyers are among the most active FHA construction borrowers we work with.

South & West Texas

Corpus Christi, El Paso, Laredo, McAllen — rural and semi-rural build-on-land buyers in these markets often find FHA OTC the most affordable path to new construction.

Texas homebuyers touring their newly built home — FHA construction loan

Walkthroughs happen at every draw milestone — you stay in control of your build

💡 Why Bartling Lending

We Shop Multiple Lenders — You Get the Best FHA Construction Rate

FHA construction loan rates and lender overlays vary significantly. Some lenders require 640+ credit scores even though FHA allows 580. Some charge higher origination fees on construction loans. We compare multiple lenders so you don’t have to — and you get the best combination of rate, terms, and approval odds.

🎖️

Veteran-Owned & Operated

Retired Army Captain Adam Bartling understands the construction loan process from personal experience — including building on Texas land.

🏦

Multiple Lenders, One Team

We shop FHA construction lenders so you see competing offers — no bank loyalty, just your best possible deal. We work for you.

📋

No Upfront Credit Check

Get a full evaluation of what you qualify for before any credit pull. We protect your credit score while you make an informed decision.

🎓

Educational First Approach

Construction loans have more moving parts than standard purchases. We walk you through every step — draw schedules, builder approval, inspections — in plain English.

👥

Dedicated Processor

Same team from application to your final walkthrough. No bouncing between departments. Your processor knows your builder, your timeline, and your file.

📍

Texas-Licensed FHA Specialist

Texas is our exclusive market for FHA construction loans. Deep local knowledge of Texas counties, Texas builders, and Texas down payment assistance programs gives you a real advantage.

❓ Common Questions

FHA Construction Loan Texas — Frequently Asked Questions

Click any question to expand the answer.

What is an FHA construction loan in Texas?

A government-backed loan that finances land, construction, and permanent mortgage in a single loan with one closing. You get FHA’s low down payment (3.5%) and flexible credit standards applied to building a new Texas home from the ground up.

What credit score do I need?

580+ for the 3.5% down option. 500–579 qualifies with 10% down. Because we shop multiple lenders, we find 580-friendly FHA construction lenders even when some banks require 620+.

Can I use an FHA loan if I already own the land?

Yes — and it’s a major advantage. If you already own land in Texas, its equity can count toward your 3.5% down payment requirement, meaning you may need little to no additional cash at closing.

What’s the difference between OTC and 203(k)?

One-Time Close builds new homes. 203(k) buys and renovates existing homes. Both are FHA. Both allow 3.5% down. The right choice depends on whether you’re starting from scratch or buying a fixer-upper in Texas.

What is the FHA construction loan limit in Texas?

FHA loan limits vary by Texas county and are set annually by HUD. Travis County (Austin) and select metro counties carry higher limits than standard counties. The limit applies to the total project cost — land plus construction. Contact us for your specific county’s current limit →

How long does an FHA construction loan take?

Approval takes 7–14 business days with a complete file. Texas construction timelines average 6–12 months. The loan auto-converts to your permanent mortgage when your Certificate of Occupancy is issued — no second closing.

Can first-time homebuyers use an FHA construction loan?

Absolutely — FHA is especially popular with first-time buyers because of the low down payment. First-time Texas homebuilders also have access to TSAHC and TDHCA down payment assistance programs that stack on top of FHA construction loans.

What builders are approved for FHA construction loans in Texas?

Texas does not require state-level licensing for general contractors and homebuilders. Your builder must be FHA-registered, insured, and approved by your lender. We have existing relationships with builders across the state. If you have a builder in mind, we can typically review and approve them within a few business days. See our general Texas construction loan information for more on builder verification.

🏠 Ready to Build?

Let’s Talk About Your FHA Construction Loan in Texas

Whether you’re buying land, choosing a builder, or just starting to explore — we’ll walk through your numbers honestly and tell you exactly where you stand. No pressure. No upfront credit check.

LET’S TALK

Free consultation · No obligation · Texas-licensed · NMLS# 2213358

About the Author

Adam Bartling

Loan Officer · NMLS# 2213358 · Retired U.S. Army Captain

Adam Bartling is a Texas-licensed mortgage loan officer and retired Army Captain with extensive experience in FHA construction loans, VA loans, and complex mortgage products. As a veteran who has navigated the homebuilding process firsthand, Adam specializes in helping Texas buyers — first-time homebuilders and experienced homeowners alike — build the home they want without overpaying for it. His team shops multiple lenders on every loan and takes an educational-first approach so clients understand every decision.

Coverage: Texas-licensed Loan Officer (FHA construction loans available in Texas)

Bartling Lending · Adam Bartling, Loan Officer NMLS# 2213358 · Serving Texas · Equal Housing Lender

FHA loan programs subject to credit approval. FHA loan limits set annually by HUD. Rates vary by lender and borrower qualification. This is not a commitment to lend.

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