Most Texas buyers qualify for more than one loan type — and picking the wrong one can cost thousands over the life of the loan. Conventional, FHA, and VA loans are the three most common paths to homeownership in Texas, each with distinct rules on down payments, mortgage insurance, and credit requirements. Here is what you need to know before you choose.
What Is a Conventional Loan?
A conventional loan is not backed by the federal government. It is issued by a private lender and, in most cases, sold to Fannie Mae or Freddie Mac. Because there is no government guarantee, lenders typically set stricter qualifying standards.
Key characteristics: - Down payment: typically 3–20% of the purchase price - Credit score: generally 620 minimum, though 740+ gets the best rates - Mortgage insurance: required if your down payment is below 20%, but it can be removed once you reach 20% equity - Loan limits: in 2024, approximately $766,550 for most Texas counties (higher in a small number of high-cost areas)
Conventional loans work well for buyers with solid credit, stable income, and enough saved to put down at least 5–10%. If you can put down 20%, you avoid private mortgage insurance (PMI) entirely — which on a $400,000 home can save roughly $100–$200 per month (illustrative; actual amounts vary).
What Is an FHA Loan?
An FHA loan is insured by the Federal Housing Administration, a division of HUD. The government backing allows lenders to accept borrowers who might not qualify for a conventional loan.
Key characteristics: - Down payment: as low as 3.5% with a 580+ credit score; 10% if your score is 500–579 - Credit score: 500 minimum (lender overlays often require higher) - Mortgage insurance: two layers — an upfront premium (approximately 1.75% of the loan amount, added to your balance) and an annual premium paid monthly; for most buyers, it remains for the life of the loan - Loan limits: vary by county; in most Texas metros, the 2024 FHA limit for a single-family home is approximately $498,257
FHA loans are a common entry point for first-time buyers in DFW and across Texas because the lower credit bar and smaller down payment reduce the upfront hurdle. The trade-off is the permanent mortgage insurance on most loans, which adds to your monthly payment for as long as you carry the loan.
What Is a VA Loan?
A VA loan is guaranteed by the U.S. Department of Veterans Affairs and is available to eligible veterans, active-duty service members, and surviving spouses. It is one of the most powerful mortgage benefits in existence.
Key characteristics: - Down payment: $0 required for most borrowers (no down payment loan) - Mortgage insurance: none — the VA does not require PMI - VA funding fee: a one-time fee (approximately 2.15% for first use with no down payment) that can be financed into the loan; waived for veterans with a qualifying service-connected disability - Credit score: the VA does not set a minimum, but most lenders require approximately 620 - Loan limits: no cap on loan amount for borrowers with full entitlement (subject to lender guidelines)
In a market like DFW — where median home prices have climbed significantly over the past several years — the ability to purchase with zero down and no monthly mortgage insurance can translate to a meaningfully lower monthly payment than either conventional or FHA options at the same purchase price.
Side-by-Side Comparison
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Min. Down Payment | ~3% | ~3.5% | 0% |
| Min. Credit Score | ~620 | ~500–580 | ~620 (lender varies) |
| Mortgage Insurance | PMI if < 20% down; removable | Upfront + annual; typically permanent | None |
| Loan Limits (2024) | ~$766,550 most TX counties | ~$498,257 most TX metros | No cap (full entitlement) |
| Best For | Strong credit, 5–20% saved | Lower credit, limited savings | Eligible military/veterans |
All figures are approximate and subject to change. Verify current limits and requirements with your lender.
How Texas Market Conditions Factor In
Texas does not have a state income tax, but property taxes are among the highest in the country — typically 1.5–2.5% of assessed value annually, depending on the county and applicable exemptions. This affects your total monthly housing cost regardless of loan type. A lender will calculate your debt-to-income (DTI) ratio using the full PITI payment (principal, interest, taxes, and insurance), so a high property tax bill can limit how much home you qualify for.
Texas REALTORS® track median prices by market, and those figures shift quarterly. When running loan scenarios, use current tax estimates for the specific county and city — not a statewide average.
Which Loan Is Right for You?
The short answer: it depends on your service status, credit profile, savings, and the property you are buying.
- If you are a veteran or active-duty service member, a VA loan is almost always worth exploring first. The combination of no down payment and no monthly mortgage insurance is difficult to beat.
- If your credit score is below 680 or your savings are limited, FHA financing may open doors that conventional lenders would close — especially if you can pair it with a Texas down payment assistance program.
- If you have strong credit (700+) and at least 5–10% saved, a conventional loan likely gives you more flexibility on property type, lower long-term costs if you reach 20% equity, and a simpler process in competitive offer situations.
Your licensed buyer's agent (TREC #9015220) and your mortgage lender should work through these scenarios together before you start submitting offers. Getting pre-approved under the right loan program — not just pre-qualified — puts you in a stronger position when you find the right home.
Choosing between these three loan types is one of the most consequential decisions in a home purchase, yet it often gets less attention than the home search itself. Run the numbers on all loan types you qualify for, ask your lender to show the total cost over five and ten years, and make sure your agent understands how each one performs in a Texas contract.