Get Conventional Loans in Texas

Key Takeaways

Conventional loans in Texas offer down payments as low as 3% with credit scores starting at 620, though better rates come with scores of 740+ and larger down payments.

Unlike government-backed loans, conventional mortgage insurance can be eliminated once you reach 20% equity, potentially saving thousands over the life of the loan.

Texas conforming loan limits are $766,550 for most counties in 2025, with higher limits in expensive markets like Austin-Round Rock.

First-time homebuyers have access to special conventional programs like HomeReady® and Home Possible® with reduced down payments and flexible income requirements.

Property taxes significantly impact Texas conventional loan payments, typically adding about 20% to your monthly payment beyond principal and interest.

Texas Conventional Loan Programs

The conventional loan market in Texas has evolved significantly to address the state's diverse housing needs. You've got options. These loans aren't backed by the government like FHA or VA loans. Instead, private lenders offer them following Fannie Mae and Freddie Mac guidelines. Let's break down what's available.

Fixed-Rate Conventional Mortgages in Texas

Fixed-rate mortgages remain the most popular choice among Texas homebuyers, offering predictability in an unpredictable market. With these loans, your interest rate stays the same throughout the entire loan term, typically 15, 20, or 30 years. 

Most Texas homebuyers choose 30-year terms for their affordability, but 15-year mortgages can save substantial interest over time. For example, on a $300,000 loan, a 15-year mortgage at 5.3% would save approximately $150,000 in interest compared to a 30-year loan at 5.8%, though monthly payments would be about $800 higher.

Adjustable-Rate Options for Texas Homebuyers

Adjustable-rate mortgages (ARMs) start with a fixed rate for a specific period before adjusting periodically based on market conditions. These loans typically offer lower initial rates than fixed-rate mortgages.

Popular ARM options in Texas include:

• 5/1 ARM: Fixed for 5 years, then adjusts annually
• 7/1 ARM: Fixed for 7 years, then adjusts annually
• 10/1 ARM: Fixed for 10 years, then adjusts annually

ARMs make sense for Texas homebuyers who plan to sell or refinance before the fixed period ends or expect their income to increase significantly. They're particularly popular in high-growth areas like Austin and Dallas, where homebuyers often relocate or upgrade within 5-7 years.

Most Texas lenders offer caps on how much rates can increase at each adjustment and over the life of the loan, providing some protection against dramatic payment increases.

Conforming vs. Non-Conforming Loans in Texas

Conforming Loans:

• Follow Fannie Mae and Freddie Mac guidelines
• Stay within established loan limits ($766,550 for most Texas counties in 2025)
• Generally offer more competitive interest rates
• Feature standardized approval requirements

Non-Conforming Loans:

• Exceed conforming loan limits (also known as jumbo loans)
• Have stricter qualification requirements
• Typically require larger down payments (10-20%)
• May have slightly higher interest rates

Conforming loans dominate the Texas market due to their accessibility and competitive terms. However, in luxury markets like certain neighborhoods in Austin, Houston, and Dallas, non-conforming jumbo loans are essential for financing higher-priced properties.

Benefits of Texas Conventional Financing

The benefits of Texas conventional Financing include:

No Upfront Mortgage Insurance Fee

Unlike FHA loans, conventional loans don’t require a 1.75% upfront mortgage insurance premium, saving you thousands at closing. For example, on a $300,000 loan, you’d save $5,250. This is a major advantage for Texas buyers with limited cash reserves, freeing up funds for a larger down payment, moving costs, or home improvements.

PMI Cancellation Options

With conventional loans, you can cancel private mortgage insurance once you reach 20% equity, unlike FHA loans where mortgage insurance often lasts the life of the loan.

In Texas’s appreciating markets, many homeowners reach 20% equity sooner thanks to rising home values. You can request PMI removal at 80% loan-to-value or rely on automatic cancellation at 78%, provided you have a good payment history.

Competitive Interest Rates

Conventional loans typically offer better rates for borrowers with strong credit. Rates are tiered by credit score, down payment, and loan-to-value ratio.
For example, a borrower with a 760 score and 20% down could get a rate 0.75–1.0% lower than a borrower with a 640 score and 5% down—saving over $60,000 in interest over 30 years on a $300,000 loan.

Flexible Property Types

Conventional loans can finance primary residences, second homes, and investment properties across Texas. They cover a wide range of property types, including:

• Single-family homes
  
  
• Condominiums (with fewer restrictions than FHA)
  
  
• Townhouses
  
  
• 2–4 unit properties
  
  
• Planned Unit Developments (PUDs)
  
  
• Manufactured homes (with some restrictions)

Texas Conventional Loan Requirements

Let's get real about what you'll need to qualify. The bar isn't as high as some think, but there are standards.

Credit Requirements for Texas Conventional Loans

Your credit score significantly impacts conventional loan approval and interest rates:

The median credit score for approved conventional loans in Texas was 738 as of January 2025, according to the Federal Housing Finance Agency.

Beyond just the score, lenders evaluate:

• Payment history (especially on existing mortgages and rent)
• Credit utilization (ideally below 30% of available credit)
• Length of credit history
• Types of credit used
• Recent credit inquiries

Most Texas lenders want to see at least 12 months without late payments on any accounts and no major derogatory events (foreclosure, bankruptcy) within the past 4-7 years.

Down Payment Options for Texas Homebuyers

Conventional loans offer flexible down payment options:

• 3% down: Available for first-time homebuyers through programs like HomeReady® and Home Possible®
• 5% down: Standard minimum for many conventional loans
• 10-15% down: Reduced PMI costs and better rates
• 20% down: Eliminates the need for private mortgage insurance

Lower down payments typically result in higher monthly costs due to increased loan amounts and PMI requirements. However, they allow homeownership with less cash upfront – a significant advantage in Texas's competitive markets where saving for a large down payment can be challenging while rents continue to rise.

Texas homebuyers can use gift funds from family members for their down payment, though some loan programs require the borrower to contribute a minimum amount from their own funds.

Income and Debt-to-Income Guidelines

Lenders evaluate your ability to repay by analyzing your debt-to-income (DTI) ratio:

• Front-end DTI: Housing costs shouldn't exceed 28% of gross monthly income
• Back-end DTI: Total monthly debts (including housing) shouldn't exceed 45% of gross monthly income

Some Texas lenders may allow DTI ratios up to 50% for borrowers with compensating factors like excellent credit or substantial reserves.

Income verification typically requires:

• Two years of employment history
• Recent pay stubs covering 30 days
• W-2 forms for the past two years
• Tax returns (if self-employed or earning significant commission/bonus income)
• Verification of employment from your employer

Self-employed borrowers face more scrutiny, with lenders typically averaging two years of tax returns to determine qualifying income.

Texas Conventional Loan Limits

Current Conforming Loan Limits Across Texas

For 2025, the Federal Housing Finance Agency has set the following conventional loan limits for Texas:

While most Texas counties follow standard conforming loan limits, Travis County (Austin area) has been designated as a high-cost area due to rapidly increasing home prices.

These limits represent the maximum loan amounts eligible for conventional financing. Loans exceeding these limits fall into the jumbo category and have different qualification requirements and interest rates.

The loan limits are adjusted annually based on changes in average home prices, with the FHFA typically announcing new limits in late November for the following year.

Texas Low-Cost vs. High-Cost Counties

Texas primarily consists of standard-cost counties, with Travis County (Austin area) being the notable exception as a designated high-cost area.

Standard-Cost Counties Include:

• Harris County (Houston)

• Dallas County

• Bexar County (San Antonio)

• Tarrant County (Fort Worth)

• Collin County (Plano)

• Most other Texas counties

High-Cost Area:

• Travis County (Austin)

The higher limit in Travis County reflects Austin's significant home price appreciation over recent years, which has outpaced other Texas markets. This higher limit helps ensure that conventional financing remains accessible to middle-income homebuyers in Austin's expensive housing market.

How Loan Limits Affect Your Texas Home Purchase

Understanding loan limits helps you:

1. Set realistic budgets: If you need financing above the conventional limit, you'll need to explore jumbo loans or make a larger down payment.
   
   
2. Calculate down payment needs: For homes priced above the limit, you can make a larger down payment to keep the loan amount within conforming limits.
   
   
3. Compare county options: If you're flexible on location, you might find that your homebuying budget goes further in standard-cost counties.
   
   
4. Plan for additional requirements: Loans near the conforming limit often have slightly higher credit score and reserve requirements than smaller loans.
   
   

Cost of Conventional Loans in Texas

PMI in Texas: What You'll Really Pay

Private Mortgage Insurance (PMI) protects lenders when borrowers put down less than 20%. In Texas, PMI typically ranges from 0.3% to 1.5% of the loan amount annually, depending on factors like credit score, down payment, loan term, and loan-to-value ratio.

For a $400,000 loan with 5% down and good credit, PMI may cost around $150–$250 monthly. PMI is billed monthly but based on an annual rate. Higher credit scores and larger down payments can significantly lower PMI costs. For example, improving your credit score from 680 to 740 could lower your PMI rate by 0.3–0.5%, saving thousands over time.

Ways to Avoid or Remove PMI

 Texas homebuyers can eliminate PMI through:

• Making a 20% down payment
  
  
• Requesting cancellation at 20% equity (based on original value)
  
  
• Automatic termination at 22% equity
  
  
• Refinancing after home appreciation

Texas home values rose 6.8% on average in 2024, helping many homeowners reach PMI cancellation thresholds faster.
Some lenders also offer lender-paid mortgage insurance (LPMI), where the lender pays PMI in exchange for a slightly higher interest rate (about 0.25–0.5% more). While it raises your rate, it lowers monthly payments and may offer tax-deductible interest benefits.

Texas Conventional Loan Interest Rate Factors

Several factors affect your conventional loan interest rate:

• Credit Score: Higher scores earn better rates
  
  
• Down Payment: Larger down payments reduce rates
  
  
• Loan Term: Shorter terms offer lower rates
  
  
• Property Type: Primary residences get better rates than investment properties
  
  
• Loan Amount: Conforming loans have better rates than jumbo loans
  
  
• Discount Points: Paying points upfront lowers your rate
  
  
• Market Conditions: Economic trends and Federal Reserve policy impact rates

A 1.5% rate difference on a $300,000 mortgage could mean over $90,000 in added interest over 30 years, making it crucial to optimize these factors before applying.

Texas First-Time Homebuyer Conventional Options

First-time homebuyers in Texas have multiple low down payment options:

• Conventional 97: Just 3% down with a 620+ credit score
  
  
• Texas Department of Housing and Community Affairs (TDHCA): Down payment assistance with conventional loans
  
  
• Texas State Affordable Housing Corporation (TSAHC): Programs for teachers, veterans, and public servants

These programs help buyers overcome the down payment barrier, a major hurdle in Texas’s rising market. For example, the Conventional 97 program allows a $9,000 down payment on a $300,000 home—far less than the $60,000 needed for a traditional 20% down.

HomeReady® and Home Possible® Availability

Fannie Mae's HomeReady® and Freddie Mac's Home Possible® programs offer:

• 3% minimum down payment
• Reduced mortgage insurance costs
• Flexible income requirements (including rental income)
• Income limits based on area median income

These programs are particularly valuable in Texas markets with rising housing costs like Austin, Dallas-Fort Worth, and Houston. They're designed specifically to help low-to-moderate income and first-time buyers access homeownership with affordable financing.

Key benefits include:

• The ability to use income from household members who aren't on the loan
• Lower mortgage insurance costs than standard conventional loans
• Homeownership education that prepares you for successful homeownership
• More flexible debt-to-income ratios in some cases

For many Texas first-time buyers, these programs provide the most affordable path to homeownership, combining low down payments with reduced ongoing costs.

Down Payment Assistance Programs in Texas

Several programs help Texas homebuyers cover down payment and closing costs:

• My First Texas Home: Offers up to 5% of loan amount in assistance
• Texas Mortgage Credit Certificate: Provides tax credits up to $2,000 annually
• City-specific programs: Many Texas cities offer local assistance

For example, the City of Houston's Homebuyer Assistance Program provides up to $30,000 for qualified buyers, while Dallas offers up to $40,000 through its Dallas Homebuyer Assistance Program. San Antonio, Austin, Fort Worth, and other major cities have similar programs with varying benefit amounts.

Most assistance comes in the form of forgivable loans or grants that don't require repayment if you live in the home for a specified period (typically 3-10 years). This significantly reduces the upfront cost of homeownership while encouraging neighborhood stability.

For the most current information on assistance programs, visit the Texas Department of Housing and Community Affairs website or consult with a loan officer experienced in first-time buyer programs.

The Texas Conventional Loan Application Process

The loan process in Texas isn't much different than other states, but knowing what to expect helps avoid surprises. Here's how it typically goes:

Required Documentation for Texas Conventional Loans

Prepare these documents for a smoother loan process:

• Government-issued ID
• Last two years of W-2s and tax returns
• Recent pay stubs (covering 30 days)
• Bank statements (past 2-3 months)
• Proof of down payment funds
• Employment verification

For self-employed borrowers, additional documentation is typically needed:

• Two years of business tax returns
• Year-to-date profit and loss statement
• Business bank statements
• Letter from CPA or business license

Having these documents organized and ready before applying can significantly speed up the process. Many Texas lenders now offer secure digital portals for document uploading, making it easier to submit and track your application materials.

Preapproval Process for Texas Homebuyers

Getting preapproved before house hunting is essential in Texas's competitive markets:

1. Complete application: Provide basic information about income, assets, and desired loan
2. Document submission: Share financial paperwork for verification
3. Credit check: Lender pulls credit reports and scores
4. Preapproval letter: Receive official documentation of your buying power

Most Texas preapprovals are valid for 60-90 days, giving you time to find the right property. In hot markets like Austin and Dallas, having a strong preapproval from a reputable local lender can make your offer more competitive against other buyers.

A thorough preapproval goes beyond just checking credit – it involves verifying income and assets to give you a precise understanding of your budget. This helps you shop confidently and make stronger offers, as sellers know your financing is likely to close successfully.

Texas Conventional Loan Timeline

The typical conventional loan process in Texas takes 30-45 days:

Several factors can affect this timeline:

• Property type (condos often take longer due to additional HOA reviews)
• Appraisal scheduling (can be delayed in busy markets)
• Title issues that require resolution
• Underwriting backlogs during peak buying seasons

Working with an experienced local lender familiar with Texas markets can help navigate these potential delays. 

Apply for a Texas Conventional Loan Today

Ready to start your Texas homebuying journey? Contact Truss Financial Group today to explore your conventional loan options. Our experienced loan officers specialize in Texas conventional financing and will guide you through every step of the process.

Our team offers:

• Personalized loan recommendations based on your specific financial situation
• Access to competitive rates from multiple investors
• Knowledge of local Texas markets and property types
• Experience with first-time buyer and down payment assistance programs
• Streamlined digital application process with local support

Call 877-990-4505 or complete our online application to get started. We're committed to making your Texas homebuying experience smooth and successful.

Frequently Asked Questions: Texas Conventional Loans

What is the minimum down payment for a conventional loan in Texas?

First-time buyers may qualify with as little as 3% down; otherwise, 5% is standard. Investment properties usually require 15–20%, and second homes 10–15%. Down payment requirements vary based on credit score, property type, and loan program. Lower down payments often mean higher interest rates and PMI until 20% equity is reached.

How do conventional loans compare to FHA loans in Texas?

• Down Payment: Conventional (3–5%), FHA (3.5%)
  
  
• Credit Score: Conventional (620+), FHA (580+)
  
  
• Mortgage Insurance: Conventional (drops at 20% equity), FHA (usually lasts for the loan’s life)
  
  
• Loan Limits: Conventional ($766,550 in most TX counties), FHA ($498,257)
  
  
• Property Standards: Conventional (less strict), FHA (stricter)
  
  

Conventional loans fit borrowers with good credit and larger down payments, while FHA loans help those with lower credit scores or limited savings.

Can I use gift funds for a conventional loan down payment in Texas?

Yes, with proper documentation. Gift funds can come from family members, domestic partners, charitable organizations, government agencies, or employer assistance programs. A gift letter is required to confirm the amount, donor relationship, and that no repayment is expected. Some programs may also require the donor’s bank statements.