How Much Down Payment Do You Really Need in Texas in 2026?

I’m Anthony Ferrando, a mortgage loan originator licensed across Texas (NMLS# 1919613). One question I hear from buyers in every market I work in, from Houston to Lubbock, is some version of: “How much do I actually need to put down?” The number most people carry in their heads is 20%. That number comes from an era when lenders required it. Today, 20% down is one option, not a requirement. Most of my clients close with significantly less. The key is understanding what changes at each down payment level and choosing the one that fits your financial picture.

This guide covers the actual down payment options available to Texas buyers in 2026, what PMI (private mortgage insurance) costs and when it goes away, and how to think about down payment size alongside your reserves and closing costs.

The Main Down Payment Options in Texas in 2026

3% down (Conventional 97). Fannie Mae and Freddie Mac both offer conventional loans with 3% down for first-time buyers (defined as someone who has not owned a primary residence in the last three years). Credit score minimum is typically 620. PMI is required but can be removed once you hit 20% equity. This option preserves cash while still putting you in a conventional loan.

3.5% down (FHA). The Federal Housing Administration insures loans with 3.5% down for borrowers at 580 credit or above. With a score of 500 to 579, the minimum is 10% down. FHA loans carry mortgage insurance premium (MIP) for the life of the loan if you put less than 10% down. FHA often works well for buyers with credit scores under 680 who can’t qualify for the best conventional rates.

5% to 19% down (standard conventional). PMI cost decreases as your down payment increases. At 5% down with a 720 credit score, PMI runs roughly 0.3% to 0.6% of the loan balance per year. Once your loan-to-value (LTV) ratio reaches 80%, you can request PMI removal. At 78% LTV, the lender must cancel it automatically under the Homeowners Protection Act.

20% down or more. A 20% down payment eliminates PMI entirely and usually earns the most favorable rate. On a $400,000 home that’s $80,000. This path optimizes for the lowest monthly cost but requires substantially more cash at closing and may strain your reserves. See the section below on when a larger down payment is worth it.

What Does PMI Actually Cost?

PMI is an insurance product that protects the lender if you default. You pay for it; the lender benefits. PMI cost depends on credit score, loan amount, and down payment size. At 5% down on a $350,000 loan with a 700 credit score, PMI might run $90 to $120 per month. At 10% down with a 740 score, it drops to roughly $50 to $70 per month.

Key facts about PMI removal: you can request removal when your balance drops to 80% of the original purchase price, or earlier if the home has appreciated and you request a new appraisal. FHA MIP works differently. On FHA loans originated with less than 10% down, MIP stays for the life of the loan unless you refinance into a conventional loan. For buyers who expect their credit or equity to improve, an FHA-to-conventional refinance in two to four years is a common strategy.

Is a Bigger Down Payment Always Better?

A bigger down payment reduces your monthly payment, lowers or eliminates PMI, and may improve your rate. But it also removes cash from your hands. Before stretching to reach 20%, consider your reserves. Many buyers clean out their savings to hit 20% and arrive at closing with nothing left. Lenders require minimum reserves, but those minimums are low. Carrying $20,000 to $30,000 in liquid savings after closing is often more financially sound than a larger down payment with a thin emergency fund.

Think about the PMI break-even as well. If PMI costs $100 per month and you’d need an extra $20,000 down to eliminate it, the break-even on that $20,000 is 200 months if you never remove PMI earlier. In practice, rising home prices and regular principal paydown mean most buyers reach 80% LTV faster than that. The extra down payment money doesn’t always pay off in a reasonable timeframe. Run the comparison with your lender before deciding.

Down Payment Assistance Through TSAHC

For qualifying buyers in Texas, the Texas State Affordable Housing Corporation (TSAHC) offers grants of 3% to 5% of the loan amount through two programs: the Home Sweet Texas Home Loan Program (for first-time buyers generally) and the Homes for Texas Heroes Program (for teachers, first responders, veterans, nurses, and corrections officers). These grants do not require repayment.

Income limits and purchase price caps apply and vary by county. The programs pair with a conventional or FHA 30-year fixed first mortgage. The rate on a TSAHC loan typically runs 0.25 to 0.75 percentage points above market, which is the tradeoff for the grant. For buyers who have sufficient income but limited savings, TSAHC can close the down payment gap without requiring years of additional saving. See the full TSAHC Heroes program eligibility breakdown for details on the profession-based track.

How Closing Costs Factor Into Your Total Cash Need

A common mistake is calculating only the down payment and ignoring closing costs. In Texas, buyers typically pay 2% to 4% of the purchase price in closing costs: lender origination fees, appraisal, title insurance (owner’s and lender’s policies), prepaid property taxes and insurance escrow, and recording fees. On a $400,000 home with 5% down ($20,000 down payment), closing costs add another $8,000 to $16,000. Your total cash needed at closing is $28,000 to $36,000.

Seller concessions can reduce your out-of-pocket cost. In markets where homes are sitting longer, sellers may agree to pay 2% to 3% of the purchase price toward your closing costs. This is common practice in Texas and needs to be negotiated into the purchase contract. Ask your agent whether seller concessions are realistic in your target neighborhoods. See how conventional down payment options compare when you factor in different closing cost scenarios.

Frequently Asked Questions

Do you still have to put 20% down to buy a house in Texas?

No. Conventional loans allow 3% down for first-time buyers, and FHA loans allow 3.5% with a 580 credit score. Twenty percent eliminates PMI and earns the best rate, but it is one option among several, not a requirement. Most Texas buyers in 2026 close with 5% to 10% down.

What is the minimum down payment for a conventional loan in Texas?

Three percent for first-time buyers through Conventional 97 programs (Fannie Mae HomeReady, Freddie Mac Home Possible). Credit score minimum is typically 620. Buyers who have owned a home in the last three years generally need 5% down. PMI is required until the loan reaches 80% LTV of the original purchase price.

How much is PMI in Texas and when does it go away?

PMI on a conventional loan typically runs 0.3% to 1.5% of the loan amount per year, depending on credit score and down payment size. On a $350,000 loan with 5% down and a 700 credit score, expect $90 to $130 per month. PMI can be removed when your balance reaches 80% of the original purchase price, and automatic cancellation is required at 78% LTV under federal law.

Can I use gift money for a down payment in Texas?

Yes. Gift funds from a family member are allowed on FHA and conventional loans with proper documentation: a gift letter and a paper trail showing the transfer. The gift cannot be a loan requiring repayment. FHA has no minimum borrower contribution requirement when using gift funds, as long as LTV is at or below 96.5%. Conventional programs have their own rules at higher LTV levels.

Is there down payment assistance available in Texas in 2026?

Yes. TSAHC offers grants of 3% to 5% of the loan amount through the Home Sweet Texas Home Loan Program and the Homes for Texas Heroes Program. These grants do not require repayment and pair with FHA or conventional 30-year fixed first mortgages. Income limits and purchase price caps apply by county; verify current terms with a TSAHC-approved lender.

What if I can only afford 3.5% down? Will I get a worse rate?

A 3.5% FHA down payment does not necessarily mean a bad rate. FHA rates are often competitive with conventional rates, especially for buyers below 700 credit. The main ongoing cost difference is FHA’s mortgage insurance premium, which stays for the life of the loan if you put less than 10% down. Buyers who improve their credit and equity often refinance into a conventional loan two to four years later to eliminate MIP.

If you’d like to run the numbers at different down payment levels for your specific situation, reach out directly and we’ll model them together, no pressure, just clarity.

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Anthony Ferrando | Mortgage Loan Originator | NMLS# 1919613 | Ferrando Financial LLC NMLS# 2403080 | Licensed in Texas. This is not a commitment to lend. Loan approval is subject to credit, income, and property qualifications. PMI cost examples are illustrative; actual costs vary by lender, loan amount, credit score, and down payment. TSAHC program availability subject to income and purchase price limits; verify current terms with a TSAHC-approved lender. Equal Housing Lender.