Conventional Loan
Conventional Loan Pros and Cons for Texas Homebuyers
Reviewed by the HomeMath editorial team Updated 2026-08-06
Key takeaways
- Down payment can be as low as 3% (but PMI may apply)
- Minimum credit score typically 620 for most lenders
- Total debt-to-income ratio generally should not exceed 43%
What is a Conventional Loan?
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as FHA, VA, or USDA. It follows the underwriting guidelines of private lenders and is usually sold to investors on the secondary market.
Pros for Texas Homebuyers
- Flexibility on property type – can be used for single-family homes, townhouses, and condos, including those in community-property states like Texas.
- Potentially lower overall cost if you can put down 20% or more, because you avoid private mortgage insurance (PMI).
- Higher loan limits in many Texas metro areas compared with government-backed programs, allowing you to finance more expensive homes.
- No requirement to pay upfront mortgage insurance premiums, unlike FHA loans.
Cons for Texas Homebuyers
- Stricter credit and income standards – lenders usually require a credit score of at least 620 and a stable employment history.
- If you put down less than 20%, you will likely pay PMI until you reach 20% equity, adding to monthly costs.
- Down-payment requirements can be higher than some government programs that allow as little as 3.5%.
- Conforming loan limits vary by county; in high-cost Texas counties the limit may be lower than the price of some desirable homes.
Key Numbers to Know
- Down payment: as low as 3% with PMI, 20% to avoid PMI.
- Credit score: most lenders look for 620 or higher.
- Debt-to-income ratio: total DTI generally should stay at or below 43%.
This article provides general information and should not be considered personalized financial or legal advice. Consult a qualified mortgage professional or attorney for advice specific to your situation.
FAQ
Can I use a conventional loan to buy a home that is subject to Texas community-property rules?
Yes. A conventional loan can be used for community-property homes, but the lender will evaluate the combined income, assets, and debts of both spouses since they own the property together. Both borrowers' credit histories will be considered in the underwriting process.
How does Texas's lack of state income tax affect my mortgage qualification?
The absence of a state income tax does not change the lender's underwriting rules, but it can increase your take-home pay. Higher disposable income may improve your debt-to-income ratio, making it easier to qualify for a conventional loan.
Do I need an attorney at closing in Texas, or can I use a title company?
In Texas most closings are handled by title companies, and an attorney is not required by law. Some buyers still choose to have an attorney review documents for added protection, but a reputable title company can typically handle the entire closing process.
What happens to PMI if I refinance a conventional loan in Texas?
When you refinance, the new loan is evaluated on its own equity level. If you have at least 20% equity at the time of refinance, you can obtain a loan without PMI. If you have less than 20% equity, the new loan may require PMI unless you qualify for an exception such as a lender‑paid mortgage insurance program.
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