Conventional Loans in Austin: What Every Buyer Needs to Know

Why Conventional Loans Are the Go-To Choice for Austin Homebuyers

If you are buying a home in Austin and you have solid credit, a stable income, and some savings for a down payment, there is a good chance a conventional loan is your best move. Conventional loans are the most widely used mortgage product in Texas and across the country, and for good reason. They are flexible, competitively priced, and available for a wide range of property types.

We work with a lot of buyers in the Austin metro who come to us having heard about FHA loans or VA loans but are not quite sure where conventional fits in. This guide breaks it all down so you can walk into your home search with confidence.

What Is a Conventional Loan?

A conventional loan is any mortgage that is not backed by a government agency. Unlike FHA loans (insured by the Federal Housing Administration) or VA loans (guaranteed by the Department of Veterans Affairs), conventional loans are originated and backed by private lenders and typically sold to investors through Fannie Mae or Freddie Mac.

Because they are not government-insured, conventional loans tend to have stricter qualification requirements. But they also come with distinct advantages that make them the preferred choice for well-qualified buyers.

Who Qualifies for a Conventional Loan?

Lenders look at several factors when evaluating a conventional loan application. Here is what we typically see in Austin buyers who qualify:

• Credit score: A minimum of 620 is required, but buyers with scores of 740 or higher get the most competitive pricing. The stronger your credit, the lower your rate adjustment (called an LLPA, or loan-level price adjustment).
• Debt-to-income ratio (DTI): Most lenders want to see a DTI below 45%, though Fannie Mae’s automated underwriting system sometimes allows up to 50% for well-qualified borrowers.
• Down payment: You can put down as little as 3% with certain conventional programs (like HomeReady or Home Possible). A 20% down payment eliminates private mortgage insurance (PMI) entirely.
• Income documentation: W2 income is the easiest to document. Self-employed buyers can still qualify but typically need two years of tax returns.
• Reserves: Some loan scenarios require documented savings beyond the down payment and closing costs.

Conventional vs. FHA: What Is the Real Difference?

This is one of the most common questions we get. Both loan types can work for first-time buyers, but there are some meaningful differences.

Mortgage insurance: FHA loans require an upfront mortgage insurance premium (currently 1.75% of the loan amount) plus ongoing monthly premiums regardless of your down payment. Conventional PMI, on the other hand, is only required when you put down less than 20%, and it can be removed once you reach 20% equity. For a buyer with a 740 credit score putting down 10%, conventional PMI is often significantly cheaper than FHA insurance.

Loan limits: In 2026, the conforming loan limit for a single-family home in Travis County is $806,500. If your purchase price exceeds that, you will need a jumbo loan. FHA limits are lower in most markets.

Property standards: FHA appraisals have stricter property condition requirements. With a conventional loan, the appraisal focuses more on market value than condition checklists.

Seller concessions: Both allow seller contributions toward closing costs, but the percentage limits differ by down payment amount on the conventional side.

The Power of a Strong Credit Score in Austin’s Market

Austin is a competitive real estate market. Homes in desirable neighborhoods like Round Rock, Cedar Park, and Mueller move fast. Having a clean pre-approval with strong credit can make a meaningful difference when a seller is weighing multiple offers.

Beyond the pre-approval, your credit score has a direct impact on your interest rate through what are called loan-level price adjustments (LLPAs). Fannie Mae and Freddie Mac use a grid that adjusts pricing based on your credit score and loan-to-value ratio. A buyer with a 760 score will typically see better pricing than a buyer at 680, even with the same income and property.

If your score is in the mid-600s, it may be worth spending a few months improving it before applying. We often walk buyers through a quick credit review during our first conversation to flag anything that could be addressed before the formal application.

Down Payment Options for Conventional Loans

One of the biggest myths in home buying is that you need 20% down to use a conventional loan. You do not. Here is how it actually works:

• 3% down: Available through HomeReady (Fannie Mae) and Home Possible (Freddie Mac) for buyers at or below 80% of area median income. These programs also offer reduced PMI rates.
• 5% down: The standard minimum for conventional loans outside of income-limited programs. PMI applies until you reach 20% equity.
• 10% down: PMI still applies but at a lower rate. Many buyers in this range find the monthly PMI cost manageable, especially when weighed against keeping more cash in reserve.
• 20% or more: No PMI. This is often the financial goal, but it is not always the smartest move if it means depleting your savings or delaying your purchase in a rising market.

What Properties Can You Finance with a Conventional Loan?

Conventional loans are versatile. You can use them to purchase:

• Primary residences (single-family homes, condos, townhomes)
• Second homes and vacation properties
• Investment properties (1-4 units)
• New construction

This flexibility is one reason conventional loans are the go-to product for buyers who own multiple properties or plan to purchase a rental in addition to their primary home.

How We Help Austin Buyers Get the Most from a Conventional Loan

We are not a call center. When you work with us, you work directly with Anthony from start to finish. That means you get a real conversation about your financial picture, honest guidance on which loan product fits best, and no hand-off to a team of people who do not know your file.

We look at your full profile: credit, income, assets, purchase timeline, and goals. From there, we structure the loan to get you the best terms available given your situation. If a different product makes more sense than conventional, we will tell you that too. Our job is to get you into the right loan, not just any loan.

Already have a Loan Estimate from another lender? Use our Second Look program. Upload it and we will send you a side-by-side comparison within 24 hours. No pressure, just information.

Frequently Asked Questions About Conventional Loans in Austin

What credit score do I need for a conventional loan in Texas?

The minimum credit score for a conventional loan is 620, but most buyers in Austin qualify with scores above 700. Buyers with 740 or higher typically receive the most competitive pricing. If your score is below 680, it may be worth reviewing ways to improve it before applying.

Can I use a conventional loan as a first-time homebuyer?

Absolutely. First-time buyers have access to several conventional loan programs, including HomeReady and Home Possible, which allow down payments as low as 3% and offer reduced mortgage insurance rates for income-qualifying borrowers.

How does PMI work on a conventional loan?

Private mortgage insurance (PMI) is required when you put down less than 20%. The cost varies based on your credit score, loan-to-value ratio, and loan term, but it is typically between 0.5% and 1.5% of the loan amount annually. You can request PMI removal once you reach 20% equity, and it automatically terminates at 22% equity under federal law.

What is the conventional loan limit for Austin in 2026?

The conforming loan limit for Travis County in 2026 is $806,500 for a single-family property. If your purchase price exceeds that amount, you would need a jumbo loan, which has different qualification requirements and pricing.

How long does it take to close a conventional loan?

Most conventional purchase loans close in 21 to 30 days from a completed application. Having your documents ready, responding quickly to requests, and working with a lender who stays on top of the file can all help keep things on track.

Ready to Get Started?

Whether you are buying your first home in Austin, moving up, or adding a rental property to your portfolio, understanding your loan options is the first step. We are here to walk you through it without the jargon or the pressure.

Get a personalized rate quote or reach out directly and we will schedule a time to talk through your situation.

Explore more on our loan options page to see how conventional loans compare to FHA, VA, and other products we offer.

Ferrando Financial LLC | NMLS# 2403080 | Licensed in Texas | Not a commitment to lend. All loans subject to credit approval. Terms and conditions apply.