Texas Mortgage Comparison
What's the Difference Between FHA and Conventional Loans in Texas?
FHA loans are government-backed and designed for buyers with lower credit scores or smaller down payments — they require as little as 3.5% down with a 580 credit score. Conventional loans are not government-backed and typically require a 620+ credit score, but they offer lower long-term costs for buyers with good credit because mortgage insurance drops off once you reach 20% equity. The right choice depends on your credit score, down payment, and how long you plan to stay in the home.
FHA vs. Conventional: Side-by-Side Comparison
| Feature | FHA | Conventional |
|---|---|---|
| Minimum credit score | 580 (3.5% down) | 620 (3% down) |
| Minimum down payment | 3.5% | 3% |
| Mortgage insurance | Required — life of loan if <10% down | Cancels at 20% equity |
| Upfront MIP/fee | 1.75% upfront MIP | None |
| DTI limit | Up to 57% | 43–50% |
| Loan limits (Travis Co.) | $524,225 (2025) | $806,500 (2025) |
| Property condition | Stricter — must meet HUD standards | More flexible |
| Best for | Lower credit, first-time buyers | 620+ credit, long-term savings |
When FHA Makes More Sense in Texas
- Your credit score is 580–619
- You have a higher debt-to-income ratio
- You've had a recent bankruptcy or foreclosure
- You want the lowest possible down payment
- You're buying a home that needs some work
When Conventional Makes More Sense in Texas
- Your credit score is 680 or higher
- You can put 20% down and avoid PMI entirely
- You're buying above the FHA loan limit ($524,225 in Travis County)
- You want mortgage insurance to eventually drop off
- You're buying a second home or investment property
FHA vs. Conventional — Common Questions
Can I switch from FHA to conventional after closing?
Yes — you can refinance from an FHA loan to a conventional loan once you have 20% equity and your credit score qualifies. Many Texas homeowners do this to eliminate the FHA mortgage insurance premium (MIP), which can save $100–$300/month.
Is FHA always cheaper than conventional for first-time buyers in Texas?
Not always. FHA has lower rates but adds an upfront 1.75% MIP and monthly MIP that lasts the life of the loan (if you put less than 10% down). Conventional PMI drops off at 20% equity. For buyers with 620+ credit, conventional can be cheaper over time.
What is the FHA loan limit in Austin, Texas for 2025?
The 2025 FHA loan limit in Travis County (Austin) is $524,225 for a single-family home. If you're buying above that price, you'd need a conventional loan or a jumbo loan.
Can I get a conventional loan with 5% down in Texas?
Yes. Conventional loans are available with as little as 3% down (Fannie Mae HomeReady or Freddie Mac Home Possible) or 5% down standard. PMI is required until you reach 20% equity, but it's cancellable — unlike FHA MIP.
Not Sure Which Loan Is Right for You?
Eddie Gamez will run the numbers on both options for your specific credit score, down payment, and purchase price — so you can make a confident, informed decision.
Compare My Options FreeCompare home loan options
Use these guides to compare FHA, conventional, and down-payment strategies before choosing a loan path.
FHA loans in Austin
Explore FHA eligibility and low-down-payment financing.
ExploreConventional loans in Austin
Review conventional financing for buyers with stronger credit.
ExploreFHA credit score requirements
Understand FHA credit-score guidelines in Texas.
ExploreDown payment assistance
See how assistance can support an Austin home purchase.
ExploreMortgage payment calculator
Compare estimated monthly payments across loan scenarios.
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