FHA vs. Conventional Loans in Texas: A First-Time Buyer's Guide
August 25, 2026
Buying your first home in Texas is exciting, but the loan choice can feel overwhelming. FHA and conventional loans both serve first-time buyers well, yet they work very differently on down payment, credit, and long-term cost. Understanding those differences upfront saves money and stress later.
FHA loans are built for buyers with less cash on hand and blemished credit histories. The minimum down payment is 3.5 percent with a credit score of 580 or higher, and the program accepts scores as low as 500 with a larger down payment. Mortgage insurance premiums are required, and on most FHA loans today the annual premium stays for the life of the loan unless the borrower refinances out of it. Texas sets FHA loan limits by county, so buyers in Austin, Dallas, Houston, and San Antonio can typically borrow more than buyers in rural counties.
Conventional loans follow guidelines set by Fannie Mae and Freddie Mac, and they offer some advantages FHA does not. First-time buyers can put as little as 3 percent down through programs like HomeReady or Home Possible, and private mortgage insurance can be canceled once the borrower reaches 78 percent loan-to-value. Credit score requirements run higher than FHA, usually in the mid-600s for the best pricing, though some lenders accept lower scores with compensating factors. Conforming loan limits in Texas also vary by county, and the cap adjusts each year to reflect changes in home prices.
Texas adds its own flavor to this decision. Property taxes run high here, so a smaller loan balance from a lower down payment can mean more cash in hand at closing but also more interest paid over time. The state has no income tax, which helps buyers qualify on the debt-to-income side, and several down payment assistance programs pair with FHA loans to stretch a first-time buyer's budget further. A buyer with strong credit, stable income, and plans to stay in the home long enough to drop PMI often comes out ahead with conventional financing. A buyer with limited savings, a thinner credit file, or a need to close quickly usually finds FHA easier to qualify for and faster to fund.
The best loan program is the one that fits the buyer's finances, timeline, and long-term plans. A side-by-side comparison of total cost over five, ten, and fifteen years usually reveals the winner more clearly than the headline rate alone.