Conventional loans are private‑mortgage‑backed loans that aren’t insured or guaranteed by the federal government. They are a popular choice for first‑time homebuyers because they often offer competitive rates and flexible terms when you meet the lender’s credit and income requirements.

Eligibility basics

  • Credit score: Most lenders look for a score of at least 620. Higher scores can secure better rates.
  • Debt‑to‑income (DTI) ratio: A DTI of 43% or lower is commonly accepted, though some programs allow higher ratios with compensating factors.
  • Stable employment and income documentation for the past two years.

Down payment and private mortgage insurance (PMI)

Conventional loans can be funded with as little as 3%–5% down. If you put down less than 20%, lenders usually require PMI to protect themselves against default. PMI stops once you reach 20% equity, either by paying down the loan or through home‑value appreciation.

Texas‑specific considerations

  • Texas does not levy a state income tax, which can leave more of your monthly cash flow available for mortgage payments.
  • The state is a community‑property state. When you’re married, the home is generally owned jointly, and both spouses are equally liable for the mortgage.
  • Many Texas buyers take advantage of the Texas Mortgage Credit Certificate (MCC) program, which can turn a portion of your federal tax liability into a credit, effectively reducing your tax bill each year.

Closing process in Texas

Closings are typically handled by a title company rather than an attorney, though you may still choose legal counsel. The title company conducts a title search, issues a title insurance policy, and prepares the settlement statement (HUD‑1 or Closing Disclosure). Texas also requires a “Seller’s Disclosure” that outlines the property’s condition.

Getting started

  • Get pre‑approved: A pre‑approval letter shows sellers you’re a serious buyer and gives you a realistic price range.
  • Save for down payment and closing costs: In addition to the down payment, budget for appraisal, inspection, title insurance, and possible escrow reserves.
  • Explore state programs: Check with the Texas State Affordable Housing Corporation (TSAHC) for first‑time‑buyer assistance, including down‑payment grants and the MCC.

This article provides general information and should not be considered personalized financial or legal advice. Consult a qualified mortgage professional and, if needed, a Texas‑licensed attorney for guidance specific to your situation.