FHA Loans, for Katy buyers with a smaller down payment or a shorter credit history.

An FHA loan is a mortgage insured by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. The government doesn't lend the money; it insures the lender against loss, and that insurance is what allows an FHA lender to accept a credit score and a down payment a conventional loan would turn away. For calendar year 2026 the FHA limit for a one-unit property across the Houston metro is $541,287, and that single figure covers all three counties Katy sits in - Harris, Fort Bend and Waller - because the entire metro prices at FHA's national floor rather than as a high-cost exception. In practice that limit reaches a large share of what actually trades in Katy, which is why FHA is the second most common program named across our Katy neighborhood data, behind only conventional.

Mortgage Insurance & Long-Term Cost

The trade-off is mortgage insurance, and it works differently from conventional PMI in a way worth understanding before you choose. FHA charges an upfront premium of 1.75% of the loan amount, almost always financed into the balance rather than paid at closing, plus an annual premium of 0.55% for a typical 30-year loan at the minimum 3.5% down. The part that catches borrowers out is duration: put less than 10% down and that annual premium stays for the life of the loan, coming off only by refinancing. Put 10% or more down and it drops after 11 years. Conventional PMI, by contrast, cancels automatically at 78% of original value. Neither program is universally better - FHA usually wins on rate and approval odds at lower credit tiers, conventional wins on long-run cost once your credit supports it - and which is actually cheaper across the years you plan to own the house is the calculation worth running before you apply.

If you would like to explore whether an FHA loan matches your purchase price, credit profile and long-term budget, reach out to 3E Lending to speak with our licensed Texas mortgage team in Katy.