Key Takeaways
- 2026 Texas conforming loan limit: $832,750 for a single-family home — same across all 254 Texas counties.
- Minimum credit score: 620 for most conventional loans, but 740+ unlocks the best rates and lowest PMI.
- Minimum down payment: 3% for first-time buyers, 5% for repeat buyers, 20% to skip PMI entirely.
- Maximum DTI: typically 45%, with some lenders stretching to 50% for strong files.
- PMI ends automatically at 78% loan-to-value — unlike FHA mortgage insurance, which often sticks around.
- Texas-specific note: No Texas county qualifies as a high-cost area in 2026, so the baseline limit applies statewide.
What Is a Conventional Loan in Texas?
A conventional loan in Texas is a mortgage that follows the lending guidelines set by Fannie Mae and Freddie Mac — the two government-sponsored enterprises that buy loans from lenders. Unlike FHA or VA loans, conventional loans are not insured or guaranteed by the federal government. They are the most common mortgage type in Texas, accounting for roughly 70% of new home loans, because they offer the broadest range of property types, the highest loan limits, and the cleanest path to dropping mortgage insurance.
To qualify for a conventional loan in Texas in 2026, you need three things: a credit score of at least 620, a down payment of 3% to 20%, and a debt-to-income ratio at or under 45%. That’s the headline. The details — what counts as income, how reserves work, which property types qualify, and whether you’ll need mortgage insurance — are where the right mortgage broker earns their keep. As a broker, we shop multiple Texas-licensed lenders so they compete for your business. That’s how we get you the best rate without changing what type of loan you’re applying for.
For a complete program overview, visit our Texas Conventional Mortgage Loan cornerstone page. This guide focuses specifically on the 2026 requirements and limits.
2026 Texas Conventional Loan Limits
The Federal Housing Finance Agency (FHFA) announced 2026 conforming loan limits on November 25, 2025. The baseline rose 3.26% over 2025, matching the FHFA House Price Index increase. In Texas, every county uses the baseline limit — no Texas county is designated high-cost in 2026.
What “baseline” means for Texas buyers: FHFA designates high-cost areas where 115% of the local median home value exceeds the baseline. The ceiling for those high-cost areas in 2026 is $1,249,125. No Texas county currently meets that threshold — even Travis County (Austin), Collin County (Plano/Frisco), and Harris County (Houston) all sit at the standard baseline. If you’re buying multi-unit property in Texas as an owner-occupant, the multi-unit limits above let you qualify for owner-occupied conventional rates on properties up to $1.6 million — a meaningful advantage over investor financing.
Conventional Loan Credit Score Requirements in Texas
The minimum credit score for a conventional loan in Texas is 620. That’s the floor Fannie Mae and Freddie Mac set, and most Texas lenders won’t go below it. But “minimum to qualify” and “minimum to get a good rate” are two very different numbers. Here’s how the bands work in 2026:
Qualifying but higher cost. You’ll qualify, but your interest rate will be roughly 0.5–1.0% higher than top-tier borrowers, and PMI premiums will be at their peak. FHA may be cheaper in this band — worth running both side by side.
Comfortable middle. Standard pricing applies. PMI costs are reasonable, and most lenders won’t impose extra fees. This is where conventional starts to clearly beat FHA for most buyers.
Strong file. You’re close to the best pricing. PMI drops noticeably. Most lenders treat this as their “preferred” band and waive certain overlay requirements.
Top-tier rates. Lowest interest rates, lowest PMI premiums, fewest underwriting questions. If you’re above 740, conventional almost always beats FHA on total cost.
How lenders read your credit: Conventional loans use the middle of your three FICO scores (Equifax, Experian, TransUnion). If there are two borrowers, the lender uses the lower of the two middle scores. So if you have a 760 and your co-borrower has a 685, the lender qualifies you both at 685 pricing. Sometimes it makes sense to put only the stronger-credit spouse on the loan — we look at this with every couple before submitting an application.
Down Payment Rules for Texas Conventional Loans
The “20% down” rule is one of the most outdated pieces of homebuying advice still floating around. Today, Texas conventional loans allow first-time buyers to put down as little as 3%, and repeat buyers can put down 5%. Here’s a clear breakdown of what each tier looks like:
3%
First-time buyers
Available through HomeReady (Fannie) or Home Possible (Freddie). Income limits apply — typically 80% of area median income. PMI required.
5%
Repeat buyers
Standard conventional minimum for buyers who’ve owned before. PMI required, but premium is lower than the 3%-down option.
10%
Sweet spot
PMI drops sharply, interest rate often improves. Many Texas buyers land here as the balance point between cash preserved and total cost.
20%+
No PMI required
Eliminates mortgage insurance entirely from day one. Best rates available. Best fit for buyers with savings or strong equity from a previous home sale.
Where Your Down Payment Can Come From
For a primary residence in Texas, conventional loans accept your down payment from a wide range of sources:
- Your own savings or checking accounts (must be “seasoned” — typically 60 days of statements showing the funds were already there)
- Gift funds from a family member, fiancé, or domestic partner — 100% of your down payment can be a gift on a primary residence, with a signed gift letter
- Proceeds from selling a home — the most common source for repeat buyers
- Retirement account loans or withdrawals — 401(k) loans don’t count against your DTI; IRA withdrawals do trigger taxes
- Down payment assistance programs like TSAHC and TDHCA — see our Texas first-time homebuyer guide for details
- Sale of personal assets — vehicles, jewelry, collectibles — with documentation showing the asset was yours and the buyer paid market value
What’s not allowed: cash hoards under the mattress, unsecured personal loans, credit card advances, or any source you can’t document a paper trail for. Underwriters will trace every dollar entering your bank account in the 60 days before closing.
Debt-to-Income (DTI) & Income Requirements
Debt-to-income ratio is the single most important number in conventional loan underwriting. It compares your total monthly debt payments — including the new mortgage — to your gross monthly income. For most Texas conventional loans, the cap is 45%, with some lenders stretching to 50% when you have strong compensating factors.
Quick DTI math
Gross monthly income: $8,000
45% DTI cap = $3,600 max total monthly debt (including new mortgage)
Existing car payment + student loan + credit card minimums of $800 leaves $2,800 available for housing payment (principal, interest, taxes, insurance, PMI).
What Counts as Income
Conventional loans accept a wider range of income sources than most buyers realize. The two-year rule is the common thread — lenders want to see income that has been consistent and is likely to continue.
- W-2 employment: 2 years’ history (with the same employer or in the same field). Recent W-2s, recent pay stubs, and a verification of employment from your employer.
- Self-employment: 2 years of personal and business tax returns, year-to-date P&L, business bank statements. If write-offs reduce your tax-return income too much, a bank statement loan may be a better fit.
- Bonuses and commission: Averaged over 2 years if they make up more than 25% of total income.
- Rental income: 75% of gross rents from existing rental properties, documented on Schedule E of your tax returns.
- Social Security, disability, pension, retirement income: All count if documented and ongoing.
- Child support and alimony: Count if there’s at least a 3-year continuance and documented receipt.
- Part-time income: Generally needs 2 years of history; lenders are cautious about this if your full-time income alone doesn’t qualify you.
Self-employed Texas borrowers run into the most surprises here. The income on line 31 of your Schedule C is what the lender uses — not your gross revenue. That’s why working with a mortgage broker who runs your numbers before you file taxes can make a six-figure difference in qualifying loan amount.
How Private Mortgage Insurance (PMI) Works
If you put less than 20% down on a Texas conventional loan, you’ll pay private mortgage insurance. PMI protects the lender (not you) if you default — but the good news is conventional PMI is structurally better than FHA’s mortgage insurance premium in two important ways:
- Conventional PMI ends automatically at 78% loan-to-value based on the original home value. You can also request removal at 80% LTV based on the current appraised value. FHA mortgage insurance often stays for the life of the loan if you put less than 10% down.
- Conventional PMI is priced by credit score. Buyers with 740+ pay significantly less than buyers at 620. FHA’s premium is flat regardless of credit, which makes FHA worse for high-credit borrowers and better for low-credit borrowers.
Typical PMI Cost Ranges (2026)
PMI is typically 0.3% to 1.5% of the loan amount per year, paid monthly. The exact rate depends on your credit score and your loan-to-value ratio. Here’s a rough idea of how it works at different credit bands on a $300,000 loan with 10% down:
- 760+ credit: roughly $40–$70/month in PMI
- 700–739 credit: roughly $90–$130/month in PMI
- 660–699 credit: roughly $140–$220/month in PMI
- 620–659 credit: roughly $250–$400/month in PMI (this is where FHA often beats conventional)
One more option worth knowing about: lender-paid PMI (LPMI). The lender pays the insurance premium in exchange for a slightly higher interest rate. This locks in the cost permanently (no removal at 78% LTV) but eliminates the monthly PMI line item. It’s a smart play for buyers who plan to stay in the home long-term and won’t refinance.
The Texas Conventional Loan Process
From first conversation to closing keys, here’s exactly how a Texas conventional loan moves through our office. Typical timeline: 25–40 days from application to closing.
Strategy call & file review
We have a 20–30 minute conversation to understand your goals, timeline, and current situation. No upfront credit check. We review your basic numbers and recommend whether conventional, FHA, or VA fits best.
Pre-approval & lender shopping
You provide pay stubs, W-2s, bank statements, and ID. We pull credit and submit your file to multiple Texas-licensed lenders. They send their best pricing — we compare and recommend. Pre-approval typically issues within 24–72 hours.
Property under contract
Once you have an accepted offer, we lock the rate and order the appraisal. In Texas, you’ll have an inspection period — about 7–10 days — to walk away if anything major surfaces.
Underwriting & conditions
The lender’s underwriter reviews everything and typically requests a few clarifications — a deposit explanation, an updated pay stub, a letter on a credit inquiry. Your dedicated processor handles every back-and-forth so it doesn’t fall on you.
Clear to close & final walkthrough
“Clear to close” means the lender has approved everything. You’ll do a final walkthrough of the property the day before or morning of closing. The title company sends your final cash-to-close number 24–48 hours before signing.
Closing day
Sign documents at the title company (or mobile notary). Wire your closing funds. Get the keys. Done. We do an annual real estate review after closing — that’s the “lender for life” part of how we work.
Run Your Real Conventional Numbers
Pre-approval in 24–72 hours. Multiple lenders competing for your file. No upfront credit check on the initial review.
LET’S TALKConventional Loan FAQs — Texas 2026
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What is the 2026 conventional loan limit in Texas?+
What credit score do I need for a conventional loan in Texas?+
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Do I need PMI on a Texas conventional loan?+
What is the maximum debt-to-income ratio for a conventional loan?+
Can I use gift funds for a conventional loan down payment in Texas?+
What’s the difference between conforming and jumbo loans in Texas?+
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Can I get a conventional loan as a self-employed Texas borrower?+
Is a conventional loan or FHA loan better in Texas?+
About the Author
Adam Bartling
Retired Army Captain · Mortgage Broker · NMLS# 2213358
Adam is a Texas-licensed mortgage broker who shops multiple lenders to find his clients the best conventional, VA, FHA, and DSCR loans. He works for you — not a bank — and provides an annual real estate review for every client he closes. Learn more about Adam →
