Texas continues to lead as the top state for net migration, with more people moving to Texas than any other state.
Texas is attracting homebuyers with its strong economy, job opportunities, and lower cost of living compared to states like California and New York.
We cover everything you need to know before you get a conventional mortgage and make Texas your home!
Check Your Home Purchase EligibilityA conventional mortgage is a home loan that is not part of any government program. Instead, it is available through private lenders such as banks, credit unions, and mortgage companies.
The primary difference between conventional mortgages and government-backed loans (like FHA or VA loans) lies in their eligibility criteria, interest rates, and down payment requirements, which we will cover in this guide.
Conventional mortgages can be classified into conforming and non-conforming loans.
Conforming loans meet the guidelines set by Fannie Mae and Freddie Mac, including loan limits and underwriting standards.
Non-conforming loans, also known as jumbo loans, exceed these limits and may have different qualification criteria.
Conventional home loans offer several advantages over VA and FHA loans, making them an attractive option for many homebuyers.
Conventional loans often come with lower interest rates compared to VA and FHA loans, particularly for borrowers with strong credit scores.
This can result in significant savings over the life of the loan. Additionally, lower interest rates mean lower monthly payments, which can free up funds for other financial goals.
Conventional mortgages provide greater flexibility in terms of loan amounts and repayment periods. Borrowers can choose from a variety of term lengths, from 10 to 30 years, allowing for more personalized financial planning.
This flexibility also extends to loan amounts, with higher limits available compared to FHA loans.
Unlike FHA loans, which require an upfront mortgage insurance premium, conventional loans do not have this added cost if the borrower puts down at least 20%. This can significantly reduce the initial expenses associated with purchasing a home.
Even if PMI is required, it can often be canceled once enough equity is built up, unlike the lifetime mortgage insurance required by some FHA loans.
To qualify for a conventional mortgage in Texas, borrowers typically need to meet the following requirements.
Most lenders require a minimum credit score of 620, but higher scores can help secure better interest rates.
Lenders usually prefer a DTI ratio below 43%, although some may allow up to 50% with compensating factors.
Conventional loans typically require a minimum down payment of 5%, though putting down 20% can eliminate the need for private mortgage insurance (PMI).
Lenders look for stable employment history and reliable income, often requiring at least two years of consistent employment.
Conventional mortgages can be used for various property types, including single-family homes, condos, and multi-family properties.
The application process for a conventional mortgage in Texas involves several steps.
Pre-qualification provides an estimate of how much you can borrow based on self-reported information. Pre-approval is more thorough, involving a detailed review of your financial situation and credit history.
Commonly required documents include proof of income (pay stubs, tax returns), bank statements, credit reports, and identification.
The process typically takes 30 to 45 days from application to closing, depending on the complexity of the loan and the efficiency of the lender.
Underwriters evaluate the borrower's creditworthiness and the property's value. This includes verifying income, assets, and debt, as well as ordering a property appraisal.
Conventional mortgages usually require a minimum down payment of 5%, but a 20% down payment is ideal to avoid PMI.
Putting down a larger amount can lower your interest rate, reduce your monthly payments, and eliminate PMI.
Texas also offers several programs to help with down payments, including grants and low-interest loans for eligible borrowers.
Your credit score, loan type, DTI ratio, and the amount of your down payment can all influence the interest rate you receive.
Closing costs for conventional mortgages in Texas typically range from 2% to 5% of the loan amount. It's advisable to compare offers from multiple lenders to find the best interest rates and closing costs.
Conventional loans are a powerful tool to help Texas residents achieve the dream of homeownership. With competitive interest rates, flexible qualifying requirements, and the potential to avoid private mortgage insurance with a larger down payment, a conventional loan can make buying a home in Texas a reality.
Are you ready to start your homeownership journey? Contact MakeTexasYourHome for a free consultation and to learn more about how a conventional loan can help you achieve your dream of buying a home in Texas.
Yes, first-time homebuyers can qualify, often with down payment assistance options.
The amount you can borrow depends on your income, credit score, and debt-to-income ratio, as well as the property value.
Unlike some government-backed loans, conventional mortgages do not have income limits, making them accessible to a broader range of borrowers.
Yes, gift funds from family members can be used for the down payment, but certain documentation and requirements must be met.
Yes, refinancing a conventional mortgage is possible, and it can be a good option for lowering your interest rate, changing your loan term, or accessing home equity.
