Conventional loan requirements in Texas, including 3% down options
The workhorse I shop the hardest: how lenders evaluate credit, income, debts, assets, down payment, property, PMI, and loan limits for a Texas conventional file.
Some eligible conventional purchase loans allow 3% down, or 97% loan-to-value, but 3% is not a blanket approval rule. The selected Fannie Mae or Freddie Mac path still controls first-time-buyer, income, occupancy, property, underwriting, education, mortgage-insurance, and funds requirements. The complete file also includes credit history, qualifying income, monthly debts, verified assets, reserves when required, loan purpose, and the applicable loan limit.
Conventional loans in Texas: overview
The Consumer Financial Protection Bureau defines a conventional loan as a mortgage that is not part of a government program. A conventional loan is conforming when it meets the applicable Fannie Mae or Freddie Mac purchase requirements, including the loan limit. Eligible transactions can include primary residences, second homes, investment properties, purchases, and refinances, but the rules change with those facts.
Conventional pricing is a grid. Your credit score, your down payment, your property type, your occupancy. Each variable adjusts the price. Two borrowers with different credit profiles on the same loan can see meaningfully different pricing. Over the life of the loan, that adds up.
Employment income is not the only possible agency path. Fannie Mae and Freddie Mac publish separate rules for converting certain eligible assets into qualifying income, with different transaction, occupancy, asset, reserve, and calculation requirements. The asset-depletion guide keeps those agency methods separate from lender-specific non-agency programs.
Agency eligibility and lender pricing are separate questions. The same eligible file can produce different combinations of rate, points, lender credits, mortgage insurance, and underwriting conditions. I compare the lenders that fit the file and show the written tradeoffs instead of reducing the decision to one advertised rate.
Which conventional loans allow 3% down?
Fannie Mae standard 97%: an eligible fixed-rate purchase of a one-unit principal residence underwritten through Desktop Underwriter. At least one borrower must meet Fannie Mae's first-time-homebuyer definition. Standard manufactured housing does not qualify for the 97% path, although eligible MH Advantage property can.
Fannie Mae HomeReady: an eligible one-unit principal residence can reach 97% loan-to-value. HomeReady is not limited to first-time buyers, but qualifying income is generally limited to 80% of area median income and the program has its own underwriting and education rules.
Freddie Mac Home Possible: an eligible one-unit principal residence can use a 3% down payment, subject to program income, property, underwriting, and other requirements. Freddie Mac HomeOne: a separate 3% option for qualified first-time buyers, with its own occupancy, education, and underwriting requirements.
Three percent down does not mean 3% total cash to close. Closing costs, prepaid taxes and insurance, initial escrow funding, credits, and permitted gifts or subordinate financing can change the actual amount due. Use the Texas low down payment guide to compare cash-to-close paths.
What conventional lenders review
How I Handle This
I start with the transaction, occupancy, property type, loan amount, income sources, debts, credit history, available funds, reserves, and timeline. I run the eligible agency path through the appropriate automated underwriting system, resolve any manual-review or lender-specific requirements, and then compare written pricing across the lenders that fit the file.
A quote is not the same as a documented pre-approval. I work through variable or self-employed income, gift funds, reserve needs, condo or project review, insurance, appraisal or eligible valuation, and debt issues before contract when the facts allow it. If a small documented change could improve the structure, I show the math before the rate is locked.
Questions I Get
Are conventional loans in Texas the same as conforming loans?
Not always. Conventional is the broader category. A conventional loan is conforming when it fits within the Fannie Mae and Freddie Mac loan limit, which is $832,750 for a one-unit Texas property in 2026. Above that line, the loan is still conventional, but it becomes jumbo.
Do I need a big down payment?
No. Some eligible fixed-rate, one-unit principal-residence purchases can reach 97% loan-to-value, which means 3% down. Fannie Mae standard 97%, HomeReady, Freddie Mac Home Possible, and HomeOne do not share identical first-time-buyer, income, property, underwriting, or education rules. PMI commonly applies above 80% loan-to-value, and cash to close also includes costs and prepaid items.
How do I remove PMI from a conventional loan?
For many conventional loans, you can ask the servicer to cancel borrower-paid private mortgage insurance after the balance reaches the cancellation point shown in your PMI disclosure, subject to payment-history, property-value, and lien requirements. Automatic termination can occur later when the loan is current. FHA and lender-paid mortgage insurance follow different rules, so start with your servicer and disclosure.
Is conventional always better than FHA?
No. Conventional and FHA evaluate risk and mortgage insurance differently. The better fit can change with credit, down payment, loan amount, property, monthly mortgage insurance, upfront costs, lender pricing, and expected holding period. I compare both from the same scenario and written estimates.
Can I use this for a rental property?
Conventional financing is commonly used for eligible second homes and one- to four-unit investment properties. FHA, VA, and USDA programs generally require an eligible borrower to occupy the home as a primary residence, subject to each program's rules.
What are the conventional loan limits in Texas for 2026?
The conforming loan limit applies statewide in Texas, so the same baseline cap covers Austin and every other county for a one-unit home. A conventional loan that fits under that cap is 'conforming'; anything above it is a jumbo loan. I keep the current figures on my Texas conforming loan limits page and confirm the exact number for your county before we structure anything.
What are the conventional loan requirements in Texas?
There is no single Texas cutoff that approves every conventional file. Underwriting evaluates the combined credit history, qualifying income, monthly debts and debt-to-income ratio, verified assets, down payment or equity, reserves when required, occupancy, property eligibility and value, loan purpose, and loan amount. Fannie Mae's DU, Freddie Mac's LPA, manual-underwriting rules, and lender requirements determine the result for the specific file.
Is there a conventional loan calculator for Texas payments?
A calculator can give you a rough monthly estimate, but it can't price the credit, down payment, property type, and occupancy adjustments that actually move a conventional quote in Texas. Rather than rely on a generic Texas conventional loan calculator, send me your scenario and I'll compare it across my lender network so you're looking at file-specific options.
FHA vs conventional loans in Texas, which one should I choose?
Neither wins automatically. Conventional and FHA price credit, down payment, and mortgage insurance differently. Compare the same loan amount, lock timing, points or credits, cash to close, monthly payment, mortgage insurance duration, and expected holding period. An eligible borrower may pay less under either route depending on the full file.
Can I refinance into a conventional loan in Texas?
Potentially. Eligibility and benefit depend on the current balance, value and equity, loan purpose, income, debts, credit, costs, new term, mortgage insurance, and current pricing. Replacing an FHA loan or seeking a PMI change is not automatically beneficial; compare written Loan Estimates and the expected holding period.
What is a conventional loan?
A conventional loan is a mortgage that is not insured or guaranteed by a government program such as FHA, VA, or USDA. A conventional loan is conforming when it meets the applicable Fannie Mae or Freddie Mac purchase standards, including the loan limit; a loan above that limit is generally nonconforming or jumbo.
What is the difference between FHA and a conventional loan?
FHA loans are insured by the federal government, while conventional loans are not part of a government loan program and may follow Fannie Mae or Freddie Mac rules. Credit evaluation, down payment, property eligibility, upfront costs, monthly mortgage insurance, and insurance duration can differ. Compare both using the same property, loan amount, timing, and holding period.
Are conventional loans assumable?
Most conventional mortgages are not freely assumable by a new buyer. The note, security instrument, due-on-sale terms, servicer process, investor rules, and limited protected-transfer exceptions control. FHA, VA, and USDA loans can be assumable only when their program and servicer requirements are met. Review the existing loan before relying on an assumption.
Do conventional loans have PMI?
Borrower-paid private mortgage insurance is commonly required when a conventional first mortgage exceeds 80% loan-to-value. Federal law and the loan's PMI disclosures govern borrower-requested cancellation and automatic termination; lender-paid mortgage insurance and FHA mortgage insurance follow different rules.
Primary sources for this guide
Let's see where conventional lands for you.
Send me your scenario. I'll price it across my lender network and show you your options. No credit pull required to start.