Two of the most common loan types for Texas homebuyers are conventional and FHA loans. They're both solid options but they work better for different situations. Here's a straightforward breakdown so you can figure out which one fits you.
What Is a Conventional Loan?
A conventional loan is a mortgage that isn't backed by a government agency. It follows guidelines set by Fannie Mae and Freddie Mac and is the most common loan type in the country.
Best for: Buyers with good credit, stable income, and some money saved for a down payment.
Key features:
- Minimum 3% down payment (with qualifying programs)
- Credit score of 620 minimum — 740+ gets the best rates
- PMI required if down payment is less than 20%, but it can be removed once you reach 20% equity
- No upfront mortgage insurance premium
- Higher loan limits than FHA
What Is an FHA Loan?
An FHA loan is backed by the Federal Housing Administration. It was designed to make homeownership more accessible for buyers with lower credit scores or smaller down payments.
Best for: Buyers with lower credit scores or limited savings who need more flexibility to qualify.
Key features:
- Minimum 3.5% down payment with a 580+ credit score
- 10% down required if credit score is 500–579
- Mortgage insurance required for the life of the loan in most cases
- Upfront mortgage insurance premium of 1.75% of the loan amount
- More flexible debt-to-income ratio requirements
Side by Side Comparison
Credit score: Conventional is better if you're above 740. FHA is more accessible if you're in the 580–640 range.
Down payment: Both start low, but FHA is more flexible with borderline credit at that down payment level.
Mortgage insurance: Conventional PMI can be removed. FHA mortgage insurance typically stays for the life of the loan — that's a significant long-term cost difference.
Loan limits: In most Texas counties the 2026 FHA limit is $524,225. Conventional goes up to $806,500. If you're buying above the FHA limit you'll need conventional or a jumbo loan.
Which One Should You Choose?
If your credit score is above 680 and you have at least 3–5% saved, conventional is almost always the better long-term choice because of the removable PMI.
If your credit score is below 640 or you've had some credit challenges, FHA may be the only path to approval right now — and that's completely fine. Getting into a home builds equity and gives you a foundation to refinance into a conventional loan later.
The right answer depends on your specific numbers. A quick conversation can tell you which program saves you more money over time.
Book a free call with Trey to find out which loan is right for your situation, or start your pre-approval here today.
Trey Garza | NMLS# 2700813 | Efinity Mortgage | San Antonio, TX