Conventional Loans in Austin, Texas
The most popular mortgage option for Austin homebuyers. As little as 3% down, competitive rates, and fast closings backed by Fannie Mae and Freddie Mac.
What Is a Conventional Loan?
A conventional loan is a mortgage that is not insured or guaranteed by a government agency like the FHA, VA, or USDA. Instead, conventional loans are backed by private lenders and follow guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that purchase mortgages from lenders.
Conventional loans are the most common type of mortgage in the United States, accounting for roughly 80% of all home loans originated. In Austin's competitive real estate market, conventional financing is often preferred by sellers because it signals a well-qualified buyer and typically offers faster, smoother closings.
Why Austin Buyers Choose Conventional Loans
With Austin's median home price hovering around $450,000 and a market that rewards strong, clean offers, conventional loans give buyers a distinct advantage. The flexibility of conventional financing allows for various property types, competitive terms, and the ability to remove private mortgage insurance once you reach 20% equity.
Conventional Loan Features
Down Payment Options
Put as little as 3% down with Conventional 97 or HomeReady programs for first-time buyers. Standard options include 5%, 10%, 15%, or 20% down. Putting 20% down eliminates PMI entirely.
Competitive Interest Rates
Conventional loans typically offer the lowest rates for well-qualified borrowers. Fixed rates available for 15, 20, 25, and 30-year terms. Adjustable-rate mortgages (ARMs) are also available for even lower initial rates.
Flexible Property Types
Finance single-family homes, condos, townhomes, planned unit developments, and multi-unit properties (2-4 units). Primary residences, second homes, and investment properties are all eligible.
Removable Mortgage Insurance
Unlike FHA loans where mortgage insurance lasts the life of the loan, conventional PMI can be removed once you reach 20% equity. This can save you hundreds of dollars per month over time.
Higher Loan Limits
The 2025 conforming loan limit for Travis County is $832,750. This covers the vast majority of Austin homes. For higher amounts, jumbo loan options are available.
Fast Closings
Conventional loans have fewer bureaucratic requirements than government-backed loans, which means faster processing. We routinely close in 30 days, and can expedite to 21 days when your offer needs it.
Conventional Loan Requirements
Meeting conventional loan requirements is straightforward for most Austin homebuyers. Here is what lenders look for:
Credit Score
A minimum credit score of 620 is required for most conventional programs. Scores of 740+ receive the best rates and terms. Borrowers between 620-739 can still qualify but may face higher rates or PMI costs. Need to improve your score? Check out our credit improvement guide.
Debt-to-Income Ratio
Your total monthly debt payments (including the new mortgage) should not exceed 45% of your gross monthly income. Some programs allow up to 50% with strong compensating factors like high credit scores or large reserves.
Employment & Income
Lenders typically require two years of consistent employment history and verifiable income through W-2s, tax returns, or pay stubs. Self-employed borrowers need two years of tax returns showing stable or increasing income.
Down Payment & Reserves
While 3% down is the minimum, your down payment source matters. Savings, gifts from family, employer assistance programs, and Texas down payment assistance programs are all acceptable sources. Lenders may also require 2-6 months of reserves (mortgage payments saved in accessible accounts).
Conventional vs. Other Loan Types
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Min. Down Payment | 3% | 3.5% | 0% |
| Min. Credit Score | 620 | 580 | No minimum |
| Mortgage Insurance | Removable at 20% | Life of loan | None |
| Loan Limit (Austin) | $832,750 | $524,225 | No limit |
| Investment Property | Yes | No | No |
| Typical Closing Time | 21-30 days | 30-45 days | 30-45 days |
Not sure which loan is right for you? Contact Adam for a free consultation.
How to Get a Conventional Loan in Austin
Step 1: Get Pre-Approved
Submit your application online or call us at (512) 956-6010. We review your credit, income, and assets to determine your maximum purchase price and best rate. Pre-approval typically takes 24 hours.
Step 2: Find Your Home
Work with your real estate agent to find the right property in Austin. Your pre-approval letter shows sellers you are a serious, qualified buyer. Need a realtor referral? We partner with top Austin agents.
Step 3: Lock Your Rate
Once your offer is accepted, we lock your interest rate and begin processing. We order the appraisal, verify your documentation, and prepare your loan for underwriting.
Step 4: Close & Get Your Keys
After underwriting approval, we schedule closing. You sign your documents, the loan funds, and you receive the keys to your new Austin home. The entire process takes 21-30 days from contract to close.
Conventional Loan FAQ
Most conventional loan programs require a minimum credit score of 620. However, borrowers with scores of 740 or higher typically receive the best interest rates. If your score is between 620-740, you can still qualify but may pay slightly higher rates or PMI premiums.
Conventional loans require as little as 3% down for first-time buyers through Conventional 97 or HomeReady programs. Repeat buyers typically need 5% minimum. Putting 20% down eliminates private mortgage insurance (PMI), which can save $100-300+ per month depending on your loan amount.
The 2025 conforming loan limit for Travis County (Austin) is $832,750 for a single-family home. This means you can finance a home up to that amount with a conventional loan. Homes priced above this limit require a jumbo loan, which has different qualification requirements.
Yes. Conventional loans are one of the few loan types that allow investment property financing. Expect to put 15-25% down for investment properties, and rates are typically 0.5-0.75% higher than primary residence rates. Rental income can be used to help qualify.
A typical conventional loan closing takes 30-45 days from application to closing. With our streamlined process and local relationships, we can often close in 21 days when needed for competitive offer situations in Austin's fast-moving real estate market.
Explore Other Loan Programs
Helpful articles: Fixed vs. Adjustable Rates · How Much House Can I Afford? · Closing Costs in Texas
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