Conventional vs. FHA, VA & USDA: Which Loan Fits Texas Buyers?

Loan Types Compared

Conventional vs. FHA, VA & USDA: Which Loan Fits Texas Buyers?

Reviewed by the HomeMath editorial team Updated 2026-08-06

Key takeaways

A 20% down payment on a conventional loan eliminates private mortgage insurance (PMI).
Conventional loans can finance up to 97% of the home’s value, but higher loan‑to‑value ratios increase rates and require PMI.
In Texas, community‑property rules let spouses combine incomes for qualification, but both spouses’ debts are counted.

Conventional vs. Government-Backed Loan Options

What buyers in Texas actually weigh is a conventional loan against FHA, VA, or USDA financing. Here is how the four main programs differ at a national level — your lender will verify the exact numbers for your Texas situation.

Conventional: best for buyers with a credit score of 620+ and at least 3% down; private mortgage insurance (PMI) drops off automatically once your balance reaches 78% of the original value.
FHA: allows credit scores as low as 500–580 with a 3.5% down payment, but charges an upfront and annual mortgage insurance premium (MIP) that typically lasts the life of the loan on 30-year terms.
VA: offers $0 down and no monthly PMI for eligible veterans and service members, in exchange for a one-time funding fee (often waived for disabled veterans).
USDA: offers $0 down for eligible buyers in designated rural areas of Texas, with low mortgage insurance and county income limits.

Your ideal choice depends on your credit tier, down payment savings, and whether you qualify for VA or USDA programs. Run the numbers below with our calculator to see how each program shapes your real monthly payment.

Conventional loans are the most common mortgage product for Texas homebuyers. They are not insured or guaranteed by the federal government, which means lenders set their own qualification standards while still following broad investor guidelines.

Conventional Loan Basics

Typical loan‑to‑value (LTV) ratios range from 80% (20% down) to 97% (as low as 3% down).
Borrowers with a credit score of 620 or higher can usually qualify, though higher scores secure better rates.
Private mortgage insurance (PMI) is required when the down payment is less than 20% of the purchase price.
Conventional loans can be used for primary residences, second homes, and investment properties.

Texas‑Specific Considerations

Texas has no state income tax, which can improve a borrower’s debt‑to‑income (DTI) ratio because there’s no state tax withholding to account for.
The state is a community‑property jurisdiction, meaning a married couple’s incomes are pooled for qualification, but both spouses’ debts are also counted.
Closing in Texas is typically handled by a title company rather than an attorney, though buyers may still retain legal counsel for advice.

Choosing Between Higher Down vs. Lower Down

20% down or more: No PMI, lower monthly payment, often a better interest rate, but requires more cash up front.
Less than 20% down: Allows you to buy sooner with less cash, but you’ll pay PMI until you reach 20% equity, and the interest rate may be slightly higher.
Consider your cash reserves, long‑term plans, and whether you can comfortably handle the extra PMI cost.

This article provides general information and should not be taken as personalized financial or legal advice.

FAQ

Can I get a conventional loan in Texas with no down payment?

Conventional loans typically require a minimum down payment of 3% to 5% of the purchase price. A zero‑down option is generally only available through government‑backed programs such as VA or USDA loans.

How does Texas’s lack of state income tax affect my mortgage qualification?

Because there is no state income tax withholding, lenders calculate your debt‑to‑income ratio using only federal tax withholdings and other deductions. This can slightly improve your DTI ratio, making it easier to qualify for a higher loan amount.

Do I need an attorney for closing a conventional loan in Texas?

Texas typically uses title companies to conduct closings, but you may choose to have an attorney review documents or represent you, especially if the transaction is complex.

What is private mortgage insurance (PMI) and when does it apply?

PMI protects the lender if the borrower defaults and is required on conventional loans when the down payment is less than 20% of the home’s value. It is usually paid monthly until the borrower’s equity reaches 20%.

Estimate your monthly payment →