Conventional Loans in Texas: Requirements, Limits & Down Payment

Most Texas buyers think a conventional loan means a 20% down payment. It does not. A conventional loan is simply a mortgage that is not backed by a government program like FHA, VA, or USDA — instead it follows the rules set by Fannie Mae and Freddie Mac. And for a first-time buyer in Texas, a conventional loan can start with as little as 3% down, with private mortgage insurance that drops off automatically once you build enough equity.

Conventional is the most common loan type in the country for a reason: with decent credit and a modest down payment, it is often cheaper over time than FHA, because the mortgage insurance is cancellable and there is no upfront insurance premium added to your balance. It is also the loan type behind most Texas down payment assistance programs.

Here is exactly how conventional loans work in Texas in 2026 — the requirements, the down payment and PMI rules, the 2026 loan limits, and how conventional compares with FHA, VA, and USDA. Figures here trace back to Fannie Mae, Freddie Mac, the FHFA, and the CFPB. ShopDPA is a referral service, not a lender; confirm current numbers with a licensed mortgage professional before you apply.

"I Need 20% Down for a Conventional Loan" — Not True

The 20%-down belief keeps more Texas buyers renting than almost any other myth. Here is what actually holds people back, and why most of it is wrong:

• “Conventional means 20% down.” A qualified first-time buyer can put down as little as 3% on a conventional loan through Fannie Mae’s and Freddie Mac’s low-down programs. 20% is what lets you skip mortgage insurance — it is not the price of entry.
• “PMI is money down the drain forever.” On a conventional loan, private mortgage insurance is required only until you reach 20% equity, then it cancels — automatically at 78% loan-to-value, by federal law. That is the key difference from FHA, where the premium often lasts the life of the loan.
• “My credit isn’t high enough.” Conventional loans typically start around a 620 credit score. Higher scores earn better rates and lower PMI, but 620 is the common floor, not 740.
• “Down payment assistance only works with FHA.” Most Texas assistance programs are built on conventional loans, including Fannie Mae’s HFA Preferred option behind the Home Sweet Texas program.

If you are not sure where you land on credit, down payment, or PMI, a licensed mortgage professional in our partner network can map it out against a real Texas purchase price in one conversation.

What Is a Conventional Loan?

A conventional loan is any mortgage that is not insured or guaranteed by a federal agency. Instead of FHA, VA, or USDA backing, it conforms to the underwriting rules published by Fannie Mae and Freddie Mac — the two government-sponsored enterprises that buy most U.S. mortgages. Because these loans “conform” to those rules and stay under the conforming loan limit, they are also called conforming loans.

Conventional loans come in fixed-rate terms (most often 30-year and 15-year) and adjustable-rate options. They are used to buy primary homes, second homes, and investment properties — one of the few loan types that allow non-primary purchases, which FHA, VA, and USDA do not.

• Down payment: As low as 3% for a qualifying first-time buyer; 5% is the typical standard minimum.
• Mortgage insurance: Private mortgage insurance (PMI) is required under 20% down and is cancellable as you build equity.
• No upfront insurance premium: Unlike FHA (1.75% upfront) or USDA (1.0% guarantee fee), conventional loans add no upfront mortgage-insurance charge to your balance.
• Property types: Primary residence, second home, or investment property.

Source: Fannie Mae HomeReady; Freddie Mac Home Possible.

Conventional Loan Requirements in Texas

Conventional loans are not government-insured, so lenders lean on your credit, income, and down payment more heavily than they do on an FHA or VA loan. The common benchmarks in Texas:

• Credit score: Around 620 minimum. Your score heavily influences both your interest rate and your PMI cost — the higher the score, the cheaper both get.
• Down payment: 3% for a qualifying first-time buyer (97% financing), 5% standard, or 20% to avoid PMI entirely.
• Debt-to-income ratio: Generally up to 45%, and sometimes as high as 50% with strong compensating factors and an automated approval.
• Steady, documented income: Two years of consistent employment or income history is the norm; self-employed buyers provide two years of tax returns.
• Reserves: Some scenarios (second homes, investment property, lower credit) require a few months of mortgage payments in savings.

There is no income limit on a standard conventional loan, which is one reason higher earners often choose it over FHA or USDA. Income limits only appear on the low-down HomeReady and Home Possible versions described below.

Down Payment and PMI on a Texas Conventional Loan

Private mortgage insurance is the piece buyers worry about most, and the rules are more borrower-friendly than the FHA equivalent. Under the federal Homeowners Protection Act, conventional PMI must:

• Cancel automatically at 78% loan-to-value — once your balance reaches 78% of the home’s original value, the lender must drop PMI, per the CFPB.
• Be cancellable on request at 80% LTV — you can ask to remove PMI once you reach 20% equity based on the original value, with a good payment history.
• Cost less as your score rises — PMI is risk-based, so a 740 score pays far less than a 660 score for the same down payment.

That cancellation feature is the heart of the conventional-vs-FHA decision. On most FHA loans, the mortgage insurance premium lasts the life of the loan unless you refinance; on a conventional loan, it goes away on its own. For a buyer who plans to stay in the home and build equity, that difference can be worth thousands over time. Source: CFPB — private mortgage insurance.

Conventional Loan Limits in Texas (2026)

A conventional loan stays “conforming” as long as it is at or below the conforming loan limit set each year by the Federal Housing Finance Agency (FHFA). For 2026, that baseline limit applies to every Texas county — there are no high-cost Texas areas with a higher GSE limit this year.

If you need to borrow more than the conforming limit, you move into jumbo-loan territory, covered next.

Conforming vs. Jumbo Loans in Texas

A jumbo loan is a conventional loan that exceeds the conforming limit — above $832,750 on a one-unit Texas home in 2026. Because Fannie Mae and Freddie Mac will not buy a loan that large, the lender keeps more risk, which means stricter requirements:

• Higher credit scores (often 700+) and larger cash reserves.
• Larger down payments are common, though some lenders allow 10%–20%.
• More documentation and sometimes a second appraisal.

For most Texas buyers, the conforming limit is high enough that a jumbo loan never comes into play. It mainly matters in higher-priced pockets of Austin, Dallas, and the Hill Country.

HomeReady and Home Possible: 3%-Down Conventional

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are the low-down conventional programs built for moderate-income buyers. They are still conventional loans, with two big advantages over a standard conventional loan:

• 3% down with reduced PMI compared to a standard low-down conventional loan.
• Flexible income sources — boarder income and non-occupant co-borrowers can count toward qualifying.
• Homebuyer education is typically required, which pairs naturally with Texas assistance programs.

The trade-off is an income limit: these programs generally cap household income at 80% of the area median income for the home’s location. If you are above that, a standard 3%-down conventional loan is still available — just with standard PMI. These are also the programs most Texas down payment assistance uses under the hood.

Conventional vs. FHA in Texas

This is the most common comparison Texas buyers face, because the two loans target overlapping buyers. The short version: FHA is more forgiving on credit, conventional is cheaper over time if your credit is decent.

Conventional vs. FHA vs. VA vs. USDA in Texas

Here is the full picture across all four major loan types, so you can see where conventional fits:

Pairing a Conventional Loan With Texas Assistance

Conventional loans are the backbone of Texas down payment assistance. The Texas State Affordable Housing Corporation (TSAHC) and the Texas Department of Housing and Community Affairs (TDHCA) both offer conventional options — often Fannie Mae’s HFA Preferred — that pair a low-down conventional first mortgage with assistance toward the down payment and closing costs.

That combination is what makes a conventional loan reachable for buyers who do not have a large down payment saved: the assistance covers a chunk of the upfront cash, and the conventional loan keeps the long-term cost low because the PMI eventually cancels. A federal Mortgage Credit Certificate can also pair with a conventional loan to turn part of your annual mortgage interest into a tax credit.

We can connect you with a licensed mortgage professional in our partner network who handles conventional loans alongside Texas assistance, so you see what you may qualify for in one place. Learn more about Texas down payment assistance.

How to Get a Conventional Loan in Texas

1. Check and strengthen your credit. Aim for 620+, and know that a higher score lowers both your rate and your PMI.
2. Decide on your down payment. 3% (first-time), 5% standard, or 20% to skip PMI — a lender can show the monthly difference.
3. Get pre-approved with a lender. A licensed mortgage professional in our partner network reviews your credit, income, and debt.
4. Ask about Texas assistance. A TSAHC or TDHCA conventional program may cover part of your down payment and closing costs.
5. Find a home and make an offer. Stay at or below the $832,750 conforming limit to keep standard conventional terms.
6. Close on your home. Complete the appraisal and underwriting, then close.

ShopDPA is a Texas home loan referral service. We connect Texas buyers with licensed mortgage professionals in our partner network who originate conventional loans. We do not originate, fund, or service loans.

Documents You’ll Need

• Photo ID and Social Security number for each borrower
• Pay stubs (last 30 days) and W-2s for the past two years
• Two years of tax returns if you are self-employed
• Bank and asset statements (last two months) to document your down payment and reserves
• Documentation for any down payment gift funds
• Details on current debts and monthly obligations

Texas Conventional Loan FAQ

† ShopDPA is an independent Texas home loan referral service. We do not originate, fund, or service loans. Conventional loan requirements, conforming limits, PMI rules, and program guidelines are set by Fannie Mae, Freddie Mac, the FHFA, and individual lenders and may change; confirm current details with a licensed mortgage professional before applying. Equal Housing Opportunity.