A conventional loan is the most straightforward path to homeownership if you have decent credit and some money saved for a down payment. A 20% down payment is not required, you don't need perfect credit, and unlike FHA loans, the mortgage insurance doesn't stay with you forever.
If you have a credit score in the mid-600s and some money saved toward closing, a conventional loan is worth looking at seriously. It gives you a clean loan structure with competitive rates, and once you build 20% equity in the home, the private mortgage insurance drops off completely. That alone can save you hundreds of dollars a month compared to an FHA loan where the mortgage insurance premium stays for the life of the loan.
I shop 40+ wholesale lenders as a mortgage broker, which means I'm not locked into one bank's rates or guidelines. I find the conventional program that fits your situation and gets you the best terms available.
Conventional Loan at a Glance
Down Payment: As low as 3%
Credit Score: 620-640 minimum, best rates at 680+
PMI: Required under 20% equity, then drops off
Max DTI: Up to 50% with automated underwriting
Requirements
Conventional pricing is tiered, so clearing the minimum is what gets your file looked at and your position above it is what moves your rate, and the score being measured is the middle of your three bureau scores.
What Your Credit Score Actually Does Here
When you see a minimum credit score on a loan program, it is worth knowing that the number is doing less work than it looks like it is doing, and that the score being measured may not be the one you have been watching.
The first thing worth sorting out is which score anyone is talking about. When you apply for a mortgage, the lender pulls your report from all three credit bureaus, and each bureau returns its own score, and underwriting uses the middle one, so not your best and not your worst. The scores you see in a free app or on a credit card dashboard are usually built on a different scoring model than the one mortgage lenders are required to use. That is why the number you have been watching and the number that comes back on a mortgage pull can land a little apart in either direction. It is normal, and it is the reason I would rather pull your credit early and tell you where you actually stand than have you guess from an app and either count yourself out or count on something that is not there.
If there are two of you on the loan, most programs take the middle score for each borrower and then qualify on the lower of the two. That surprises people, and it is worth knowing before you decide who goes on the application, because a strong second income does not offset a weaker score the way most people expect it to.
Then there is the question of what a minimum is actually for. A published minimum is a floor for eligibility, meaning the point where a program will look at your file at all, and it is not the score that sets your rate. Pricing moves in tiers above that floor, so two borrowers can both clear the same minimum and still be offered noticeably different terms, and moving up into the next tier is often a smaller lift than people assume. That is a conversation worth having before you apply rather than after.
The last piece is timing, and it is the one that catches people late. Your credit is pulled when you apply, and on almost every loan it is pulled again shortly before closing. Anything that changed in between shows up on that second pull, so new financing on a car, a furniture purchase on a store card, or even a well meant application for a new credit card can move your score or your debt load. That lands at exactly the point in the process where there is the least room left to fix it. The simplest rule while you are under contract is to keep your credit looking the way it looked on the day you applied, and if something comes up, please call me first so we can look at it together before it turns into a problem.
Conventional loan requirements are more flexible than most people assume. Here's what lenders are actually looking for:
Credit score. The minimum is typically 620 to 640 depending on the lender and the specifics of your file. That said, if your score is 680 or higher, you'll qualify for noticeably better interest rates and lower mortgage insurance costs. The difference between a 640 and a 720 can be meaningful on your monthly payment, so if you're close to that next tier it's worth having a conversation about whether it makes sense to wait a few months and work on your score first.
Down payment. Fannie Mae and Freddie Mac set the floor at 97% loan to value for qualifying buyers. Coming in at a lower loan to value, your mortgage insurance drops and your monthly payment gets more comfortable. And if you can reach 20%, you skip private mortgage insurance entirely from day one.
Debt-to-income ratio. Lenders generally want your total monthly debts, including the new mortgage payment, to stay at or below 45% of your gross monthly income, and Fannie Mae's automated underwriting can approve up to 50% on files with strong compensating factors. If you're not sure where you stand on this, that's one of the first things we look at during pre-approval.
Loan limit. The 2026 conforming loan limit in Harris County is $832,750. If you need more than that, you're looking at a jumbo loan, which has different requirements.
Ready to gather your file? Here are the documents you need for a conventional loan, with what each one proves.
PMI: What It Costs and When It Goes Away
Above 80% loan to value on a conventional loan, you'll pay private mortgage insurance. PMI protects the lender, not you, but it's a standard part of the deal for buyers who don't have 20% saved.
The good news is that PMI drops off automatically once you reach 20% equity in the home. You can also request early removal once you hit that threshold. Over the life of a 30-year mortgage that difference adds up, because on FHA the annual premium stays for the entire life of the loan if you put less than 10% down.
Conventional vs FHA
| Feature | Conventional | FHA |
|---|---|---|
| Minimum Down Payment | 3% | 3.5% |
| Minimum Credit Score | 620-640 | 580 |
| Mortgage Insurance | Drops off at 20% equity | Stays for life (above 90% loan to value) |
| Max DTI | Up to 50% with automated underwriting | Up to 57% with automated underwriting |
| Best For | 680+ credit, plan to stay long-term | 580-680 credit, limited savings |
The biggest difference is mortgage insurance. With an FHA loan, you pay an upfront mortgage insurance premium of 1.75% plus an annual premium of 0.55%, and when the loan closes above 90% loan to value, that annual premium stays for the entire life of the loan. It never goes away. With a conventional loan, private mortgage insurance is required above 80% loan to value, but it drops off automatically once you reach 20% equity. Over the life of a 30-year mortgage, that difference adds up to tens of thousands of dollars.
FHA loans do have a lower credit score floor, starting at 580 compared to the 620 to 640 range for conventional. So if your credit is in the low 600s or below, FHA might be your better path right now. But if your score is 640 or higher and you have at least 3% for a down payment, conventional almost always makes more financial sense in the long run because of how mortgage insurance works.
Read our full comparison: FHA vs Conventional Loans in Houston
Who Should Get a Conventional Loan
Buyers with good credit who want the best long-term deal. If your credit score is in the mid-600s or higher, a conventional loan gives you access to competitive rates and a mortgage insurance structure that actually ends. You're not locked into paying extra for 30 years.
Repeat buyers and people upgrading homes. If you already own a home or have owned one before, conventional is usually the cleanest option. There are no first-time buyer requirements, and the guidelines around using equity from a sale are straightforward.
People refinancing out of FHA. If you bought with an FHA loan a few years ago and you've built up 20% equity, refinancing into a conventional loan eliminates your mortgage insurance entirely. This is one of the most common moves I help Houston homeowners make, and it can drop your monthly payment by $200 or more depending on your loan amount.
Houston Market Context
Houston's median home price is currently in the $320,000 to $340,000 range. Here's what the numbers look like on a $340,000 home with a conventional loan:
At 97% loan to value, you'll have private mortgage insurance until you reach 20% equity, but on a home that's appreciating in a growing market like Houston, that can happen faster than you'd expect.
At 95% loan to value, your monthly mortgage insurance cost is lower than it is at the 97% tier.
At 80% loan to value, you skip mortgage insurance completely from the start.
If you're a first-time buyer who doesn't have 20% saved, that's completely normal and it's not a reason to wait. The 97% and 95% loan-to-value options exist specifically for buyers in your position, and Houston also has down payment assistance programs that can cover part or all of your down payment depending on your income and the area you're buying in.
Down Payment Assistance
Several down payment assistance programs in Houston work with conventional loans. TSAHC is available for first-time and repeat buyers, and there are additional programs through Harris County that can reduce or eliminate your out-of-pocket costs depending on your income.
Learn more: Houston Down Payment Assistance Programs
The Process
- Pre-approval. This is always the first step, and it happens the same day you reach out. A pre-approval tells you exactly how much you can afford, what your estimated rate and payment will look like, and it shows sellers that you're a serious buyer when you make an offer.
- Finding the right rate. Because I work as a broker with access to 40+ wholesale lenders, I'm not quoting you one bank's rate and hoping it works. I shop the market on your behalf and find the combination of rate, closing costs, and loan terms that fits what you're trying to do. Some buyers want the lowest possible rate. Some want the lowest closing costs. Some want to buy down the rate. We figure out what matters most to you and build around that.
- Closing. Conventional loans typically close in 30 to 45 days from contract to keys. The timeline depends on appraisal scheduling, title work, and how quickly you can get your documents in, but there's nothing about the process that needs to be stressful or confusing. I'm available by phone or text at every step, and I make sure you know what's happening and what's coming next before it happens.
What You Should Know
Conventional loans are backed by Fannie Mae and Freddie Mac, and programs like HomeReady and Home Possible reach 97% loan to value specifically for low-to-moderate income borrowers. Closing costs in Houston typically run 2-4% of the loan amount, and sellers can contribute up to 3-6% in seller concessions depending on your down payment. If you want to lower your rate upfront, discount points and rate buydowns are available. Gift funds from family members can also be used toward your down payment on a conventional loan, and your lender will set up an escrow account to manage property taxes and insurance as part of your monthly payment.
Frequently Asked Questions
What is the minimum down payment for a conventional loan in Houston?
As little as 3%. On a $340,000 Houston home, that's $10,200. There are also down payment assistance programs available in Harris County that can reduce or eliminate your out-of-pocket costs depending on your income.
What credit score do I need for a conventional loan?
The minimum is typically 620 to 640, but you'll get the best rates and lowest mortgage insurance costs with a score of 680 or higher. If your score is on the lower end, we can talk through whether it makes sense to apply now or take a few months to improve your score first.
When does PMI drop off a conventional loan?
Private mortgage insurance drops off automatically when you reach 20% equity in the home. You can also request early removal once you hit that threshold. This is one of the biggest advantages over FHA, where the annual mortgage insurance premium stays for the life of the loan when the loan closes above 90% loan to value.
What is the conforming loan limit in Harris County for 2026?
The 2026 conforming loan limit in Harris County is $832,750. If you need more than that, you're looking at a jumbo loan with different requirements.
Can I use gift money for a conventional loan down payment?
Yes. Conventional loans allow gift funds for the down payment from family members, including parents, siblings, grandparents, or domestic partners. The donor must provide a signed gift letter stating the amount, the relationship to the borrower, and that the funds do not need to be repaid. Lenders will also verify that the funds have been transferred to your account before closing. Gift funds typically cannot come from an employer, seller, or unrelated third party.
What are the closing costs on a conventional loan in Houston?
Closing costs on a conventional loan in Houston typically run 2% to 5% of the loan amount. On a $350,000 loan, expect $7,000 to $17,500 in total closing costs, which includes lender fees, title insurance, appraisal, prepaid taxes and insurance, and homeowner's association transfer fees where applicable. Harris County title costs are on the higher end compared to other Texas counties. Your lender is required to provide a Loan Estimate within three business days of application, which itemizes all costs in a standardized format.
Can the seller pay my closing costs?
Yes. Seller concessions are allowed on conventional loans. The amount the seller can contribute depends on your loan to value: up to 3% of the purchase price above 90% loan to value, up to 6% between 75% and 90%, and up to 9% at or below 75%. Seller concessions are negotiated as part of the purchase offer and must be documented in the purchase contract. In a competitive Houston market, requesting seller concessions can affect the strength of your offer, so weigh this against your cash position.
What is a rate buydown and is it worth it?
A rate buydown means you pay discount points upfront at closing to secure a lower interest rate for the life of the loan. One point equals 1% of the loan amount. To determine if it's worth it, divide the upfront cost of the points by the monthly savings to find your break-even point, and if you plan to stay in the home longer than that, the buydown saves money. Builders in Houston's new construction market frequently offer temporary 2-1 buydowns, where the rate steps down over the first two years, as incentives.
Which credit score do mortgage lenders use?
Lenders pull your credit from all three bureaus and qualify on the middle of the three scores, not your highest and not your lowest. If there are two borrowers on the loan, most programs use the lower of the two middle scores. The score shown in a free credit app is often built on a different scoring model than the one mortgage lenders use, so the two numbers can land apart. A published program minimum is also a floor for eligibility rather than the score that sets your rate, because pricing moves in tiers above the minimum. It is worth having your credit pulled properly before you assume you are above or below a program's floor.
Related Resources
- FHA vs Conventional: Which Is Better in Houston?
- Houston Down Payment Assistance Programs
- First-Time Homebuyer Checklist
- First-Time Homebuyer Programs in Houston - low down payment conventional options and DPA programs
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