Conventional Loan Down Payment Requirements in Texas 2026 — What You Actually Need

I'm Bond Peter Njoku, and one of the most persistent myths I run into with Texas buyers — especially move-up buyers in Plano, McKinney, and Frisco — is that you need 20% down to get a conventional loan. You don't. The 20% threshold matters for one specific reason: eliminating PMI. But it's not the minimum, and for a lot of buyers in 2026, putting 20% down is actually the wrong financial move. Here's the honest breakdown.

Conventional Loan Down Payment Minimums

Fannie Mae and Freddie Mac set the rules for conventional loans, and both allow down payments well below 20%:

• 3% down — available to first-time buyers through Fannie Mae HomeReady or Freddie Mac Home Possible. Requires a minimum 620 credit score and income at or below 80% of area median income.
• 5% down — the standard minimum for conventional borrowers who don't qualify for 3% programs. Available to both first-time and repeat buyers.
• 10% down — meaningfully reduces your PMI rate and monthly payment without fully eliminating it.
• 20% down — eliminates PMI entirely and locks in the best loan pricing, but ties up more cash at close.

Down Payment vs. PMI — The Real Trade-Off

Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is under 20%. Unlike FHA mortgage insurance — which stays for the life of the loan in most cases — conventional PMI is cancellable. Once you reach 20% equity in your home, you can request cancellation. At 22% equity, servicers are required to remove it automatically.

This matters a lot in the DFW market. If home values in your area keep appreciating — which they have been in Collin County and the Metroplex's outer ring — you may hit 20% equity faster than you'd expect, making a lower down payment today less costly over time than it looks on paper.

Down Payment Options by Credit Score

PMI rates vary by lender and loan-level pricing adjustments (LLPAs). Not a rate or fee guarantee.

A Real Example: $400,000 Home in Plano

On a $400,000 purchase in Plano with a 740 credit score:

• 5% down ($20,000) — loan amount $380,000, PMI roughly $95–$140/month. PMI cancels when balance hits ~$320,000 or appraised value supports 20% equity.
• 10% down ($40,000) — loan amount $360,000, PMI roughly $60–$90/month.
• 20% down ($80,000) — loan amount $320,000, no PMI. But you're tying up an extra $60,000 compared to the 5% scenario.

For buyers with solid savings but limited cash on hand, 5–10% down often beats 20% when you factor in opportunity cost of that extra capital and the likelihood of appreciation canceling PMI within 3–5 years anyway.

Can You Stack Down Payment Assistance on a Conventional Loan?

Yes — and this is an underused strategy in DFW. Programs like TSAHC Home Sweet Texas offer 3–5% grants that can cover your minimum down payment on a conventional loan entirely, leaving your own cash for closing costs and reserves. Income limits apply (roughly $97,200 for Dallas/Tarrant counties in 2026), but many move-up buyers still qualify, especially in the outer suburbs.

Stacking DPA with a conventional loan is one of my favorite strategies for buyers who have the income and credit for conventional but are still building savings. I close these regularly across DFW.

Conventional vs. FHA — Which Makes More Sense for Your Down Payment?

If your credit score is 660 or above, conventional almost always beats FHA on total cost over time — even with PMI. Here's why: FHA requires an upfront mortgage insurance premium of 1.75% of the loan amount, plus monthly MIP that lasts for the life of the loan (if you put less than 10% down). Conventional PMI has no upfront premium and cancels at 20% equity. The crossover point where conventional wins usually comes within 5–7 years for borrowers at 660+.

Below 620, FHA is the only path. Between 620–659, it depends — I'll run both scenarios side by side so you can see the real monthly and lifetime cost difference.

Let's Run Your Numbers

Every buyer's situation is different. The right down payment for a $280,000 home in Garland looks different than the right down payment for a $550,000 home in Southlake. I work conventional loans across DFW every week — text or call me at 469-545-7180 and I'll put together a side-by-side comparison for your specific price range, credit score, and savings situation. Or start with my pre-approval and I'll build the numbers from there.