The "20% down" rule is one of the most persistent myths in home buying. For most Texas buyers, it is not a requirement — and putting that much down is not always the right move even if you can afford it. The real question is which loan type fits your situation, what the actual minimum is, and what trade-offs come with each choice.

The Real Minimums by Loan Type

There are four loan categories most Texas buyers use. Each has its own floor:

Conventional loans — backed by Fannie Mae or Freddie Mac — allow as little as 3% down for qualified first-time buyers, and 5% for repeat buyers in most cases. Your credit score, debt-to-income ratio, and the property type all affect what a lender will approve.

FHA loans — insured by the Federal Housing Administration — require a minimum of 3.5% down if your credit score is 580 or above. Buyers with scores between 500 and 579 typically need 10% down. FHA is often the path for buyers with shorter credit histories or higher debt loads.

VA loans — available to eligible veterans, active-duty service members, and surviving spouses — require 0% down with no private mortgage insurance. This is one of the strongest buyer benefits available, and it is widely used across Texas given the state's large military population near installations like Fort Cavazos, Fort Bliss, and Lackland AFB.

USDA loans — for homes in eligible rural and some suburban areas — also allow 0% down. Parts of the DFW exurbs and rural Texas counties qualify, though the eligible maps are updated periodically and should be confirmed with your lender.

Quick Reference: Conventional = 3–5% minimum. FHA = 3.5% minimum. VA = 0% (for eligible borrowers). USDA = 0% (for eligible areas and income limits). All figures are approximate minimums and subject to lender qualification.

What Putting Less Down Actually Costs You

A lower down payment means a larger loan balance, which means a higher monthly payment. But the more important cost to understand is mortgage insurance.

On a conventional loan, if you put down less than 20%, you will typically owe private mortgage insurance (PMI). PMI is added to your monthly payment and generally ranges from approximately 0.5% to 1.5% of the loan amount per year, depending on your credit score and loan-to-value ratio. Once your equity reaches 20%, you can request PMI removal.

On an FHA loan, you pay a mortgage insurance premium (MIP) regardless of your down payment. FHA MIP includes an upfront charge (typically 1.75% of the loan, rolled into the balance) and an annual premium (approximately 0.55% to 1.05% per year). For most FHA borrowers who put the minimum down, MIP lasts the life of the loan — a meaningful long-term cost.

VA and USDA loans do not require monthly mortgage insurance, but both charge a one-time funding fee that can be rolled into the loan.

Texas-Specific Down Payment Assistance Programs

Texas buyers who need help with the down payment or closing costs have several options worth exploring.

The Texas Department of Housing and Community Affairs (TDHCA) administers programs including My First Texas Home, which offers down payment assistance alongside a 30-year fixed-rate mortgage. Income limits and purchase price caps apply and vary by county.

The Texas State Affordable Housing Corporation (TSAHC) offers similar programs with grants — money that does not need to be repaid — for buyers who meet income and property requirements.

Local entities in DFW and other metro areas also run assistance programs. Your lender and your buyer's agent can help you identify what is currently active for the area and price range you are targeting.

Important: Down payment assistance programs typically have income caps, purchase price limits, and first-time buyer requirements. Funds are also limited and can run out. Verify current availability and terms directly with the program administrator or your lender before planning around them.

How Down Payment Affects Your Offer in a Competitive Market

Down payment amount does affect how sellers and their agents read your offer, particularly in fast-moving Texas markets. A higher down payment signals stronger financing — less risk that the deal falls apart due to appraisal gaps or loan denial.

In the DFW market, where multiple-offer situations are still common in certain price ranges, conventional offers with larger down payments are sometimes preferred over FHA or VA offers — not because of the buyer, but because of differences in appraisal requirements and repair standards. A licensed REALTOR® who knows local market norms can help you structure an offer that is competitive without overpaying or depleting your reserves.

That said, winning a home with 0% down is genuinely possible with a VA loan, and many Texas sellers and listing agents are experienced with VA transactions.

What You Should Have Beyond the Down Payment

Down payment is not the only cash you need at closing. Texas buyers should also plan for:

  • Closing costs — typically approximately 2% to 5% of the loan amount, covering lender fees, title insurance, prepaid taxes and insurance, and other items
  • Inspection and option period costs — the option fee in Texas contracts is paid directly to the seller and is typically non-refundable; inspection fees are paid directly to inspectors
  • Cash reserves — many lenders want to see one to three months of housing payments in savings after closing
Rule of Thumb: Budget for your down payment plus an additional 3–5% of the purchase price for closing costs and initial reserves. For a $350,000 home, that is roughly $10,500–$17,500 beyond the down payment itself. These figures are illustrative and will vary based on your loan type, lender, and negotiated terms.

The right down payment is the one that fits your loan, your savings, your timeline, and what the local market requires to get an offer accepted. For most Texas buyers, that number is well below 20% — and knowing your real options puts you in a much stronger position from day one. An agent licensed through TREC #9015220 can walk you through how these numbers apply to your specific situation.

Equal Housing Opportunity.