When Texas homebuyers ask me which loan program fits their situation, the question almost always comes down to FHA versus Conventional. Both are mainstream, both finance most properties, and both will get you to a closing table. The right answer for you depends on three things: how much down payment you can comfortably put together, what your credit profile looks like, and how long you plan to keep the loan.
How FHA Loans Work in Texas
An FHA loan is insured by the Federal Housing Administration, which lets lenders offer flexible terms to a wider group of buyers. Down payments can start as low as 3.5%, and credit guidelines are typically more forgiving than Conventional. FHA also accepts gift funds for the down payment, which helps first-time buyers whose family wants to help.
The tradeoff is mortgage insurance. Every FHA loan carries an upfront premium and an annual premium, and for most borrowers that annual premium stays on the loan for its life. If your long-term plan is to keep the home for 15+ years, that cost adds up.
How Conventional Loans Work
A Conventional loan isn't backed by a government agency, which gives it more flexibility on property types. You can finance a primary residence, a second home, or an investment property with the same product. Down payments can start around 3% for qualified buyers — sometimes lower than FHA when you factor in mortgage insurance differences.
The biggest structural difference is private mortgage insurance. PMI on a Conventional loan can be removed once you reach the equity threshold the lender requires — typically 80% loan-to-value. FHA's premium usually can't, unless you refinance out of FHA entirely.
Picking Between Them
Here's how I usually frame the decision with my clients:
- Lower credit, lower savings, first home? FHA's flexible guidelines often unlock financing you might not get on a Conventional file.
- Solid credit, 5%+ down, planning to stay long-term? Conventional usually costs less over the life of the loan because PMI eventually drops off.
- Buying a second home or investment property? Conventional is the default — FHA is generally limited to primary residences.
- Plan to refinance in 3–5 years? FHA can be the right first step, then refinance to Conventional once you have equity and stronger credit.
What I Do on Your File
When you talk to me, I run both scenarios side by side using your real numbers — not a generic calculator estimate. You see the down payment, monthly payment, mortgage insurance, and total cost over a few different time horizons. Then I recommend the program that actually fits your situation, not just what closes the fastest.
If you'd like to compare options for your specific situation, start a pre-approval with me. I'll run both programs and explain the math in plain English so the choice is yours, not the lender's.
Frequently Asked Questions
What credit score do I need for an FHA loan in Texas?
FHA loans in Texas typically require a minimum credit score of 580 to qualify for the 3.5% down payment option. Borrowers with scores between 500 and 579 may still qualify but would need a 10% down payment. Individual lenders may impose higher score requirements (called overlays) on top of FHA minimums. A mortgage professional can review your actual credit file and tell you exactly where you stand.
What is the down payment for FHA vs Conventional loans in Texas?
FHA loans in Texas require a minimum 3.5% down payment for borrowers with a 580+ credit score. Conventional loans can start as low as 3% down for well-qualified buyers, though 5% or more is common. While FHA has a lower credit score threshold, Conventional loans can cost less over time because private mortgage insurance (PMI) can be removed once you reach 20% equity — unlike FHA mortgage insurance, which typically stays for the life of the loan.
Which is better in Texas — FHA or Conventional?
Neither is universally better — it depends on your credit score, down payment, and how long you plan to keep the loan. FHA is often the better choice for buyers with lower credit scores or limited savings. Conventional typically costs less over time for buyers with stronger credit (680+) and at least 5% down, since PMI eventually drops off. A side-by-side comparison using your real numbers is the most reliable way to decide.
Ready to take the next step?
Talk to me about your specific situation. I'll run real numbers — no estimates, no industry-speak — and tell you straight what fits.