Step 3 of 6: Get pre-approved

The Right Loan Depends on You

There are four common loan types for first-time buyers, and each one fits a different situation. Take the quick quiz below to see which matches your credit, savings, and goals.

In this guide

Every loan works a little differently: how much you put down, what your credit needs to be, whether you pay mortgage insurance. None of them is automatically "best." This guide compares the four main options side by side so you walk into pre-approval already knowing what fits you.

Compare FHA, Conventional, VA, and USDA loans side by side
Take a 2-minute quiz to find your best match
See what mortgage insurance (PMI) actually costs you
Check out DFW programs for first-time buyer help
1,683
Readers chose right mortgage type
58%
Went with conventional loan
34%
Chose FHA for lower down payment

Which Mortgage Type Is Right for You?

Answer 5 quick questions to get your personalized recommendation

What is your current credit score range?

How much can you put down as a percentage of the home price?

Have you served in the U.S. military?

Are you looking in urban DFW or rural areas?

What's most important to you?

Your Best Match:

Quick Comparison: All Loan Types

Feature
FHA
Conventional
VA
USDA
Minimum Credit Score
580
620
No minimum*
640
Minimum Down Payment
3.5%
3-5%
0%
0%
Mortgage Insurance
Required (lifetime)
Required (<20% down)
None
Required
PMI Removable?
✗
✔ At 20% equity
N/A
✗
Best For
Lower credit scores
Strong credit/finances
Veterans/Military
Rural buyers
Loan Limits (DFW 2024)
$498,257
$766,550
$766,550
Varies by area

Deep Dive: Each Loan Type

FHA Loan

The accessible option for first-time buyers

Minimum Down Payment
3.5%

Pros:

  • Lower credit score requirements (580+)
  • Smaller down payment (3.5%)
  • More lenient debt-to-income ratios
  • Easier to qualify after bankruptcy/foreclosure

Cons:

  • Mortgage insurance for life of loan
  • Upfront mortgage insurance premium (1.75%)
  • Lower loan limits than conventional
  • Property must meet FHA standards
Best for: Buyers with lower credit scores or limited down payment savings

Conventional Loan

The standard choice for strong borrowers

Minimum Down Payment
3%

Pros:

  • PMI can be removed at 20% equity
  • Higher loan limits available
  • More property type flexibility
  • Better rates with excellent credit

Cons:

  • Higher credit score required (620+)
  • Stricter income/employment verification
  • Larger down payment recommended (5%+)
  • PMI required if less than 20% down
Best for: Buyers with good credit and stable income who want to build equity faster

VA Loan

Exclusive benefit for those who served

Minimum Down Payment
0%

Pros:

  • No down payment required
  • No mortgage insurance
  • Competitive interest rates
  • No prepayment penalties

Cons:

  • Only for military/veterans/families
  • VA funding fee (1.4-3.6% of loan)
  • Property must meet VA standards
  • Seller may resist VA offers
Best for: Active duty military, veterans, and eligible family members

USDA Loan

Zero-down option for rural buyers

Minimum Down Payment
0%

Pros:

  • No down payment required
  • Low mortgage insurance rates
  • Flexible credit requirements
  • Below-market interest rates

Cons:

  • Property must be in eligible rural area
  • Income limits apply
  • Longer processing times
  • Annual mortgage insurance fee
Best for: Buyers looking in eligible rural areas outside DFW metro with moderate income

Understanding PMI (Private Mortgage Insurance)

PMI is required on conventional loans when you put down less than 20%. Calculate what you'll pay and learn when you can remove it.

PMI Calculator

Monthly PMI
$0
Annual PMI Cost
$0
Loan Amount
$0

DFW First-Time Buyer Programs

Texas and DFW-area programs that can help with down payments, closing costs, and mortgage assistance.

Texas Mortgage Credit Certificate (MCC)

Tax Credit

Get a federal tax credit for a portion of your mortgage interest each year, putting more money back in your pocket.

Benefit
Up to 20% tax credit
Income Limits
Varies by county
First-Time Only?
Yes

Texas State Affordable Housing Corporation (TSAHC)

Down Payment Assistance

Provides down payment and closing cost assistance for eligible first-time homebuyers in Texas.

Benefit
Up to 5% assistance
Repayment
Due at sale/refinance
Credit Score
640 minimum

My First Texas Home Program

Combined Benefits

Combines down payment assistance with competitive interest rates for Texas first-time buyers.

Benefit
DPA + low rates
DPA Amount
Up to 5%
Income Limits
Area median income

Real Scenarios: Which Loan Works Best?

Sarah: Limited Savings
Marcus: Strong Credit
James: Veteran

Sarah: Limited Savings, Building Credit

Profile: Credit score 600, $10,000 saved for down payment and closing costs, looking at $280,000 homes in Fort Worth

Recommended: FHA Loan

With 3.5% down ($9,800), Sarah qualifies despite her credit score and has enough left for closing costs.

Why This Works:

  • FHA accepts 580+ credit scores
  • Lower down payment requirement fits her savings
  • More lenient debt-to-income ratios
  • Can refinance to conventional later when credit improves

Marcus: Strong Credit, Solid Income

Profile: Credit score 740, $25,000 saved, looking at $350,000 homes in Plano, stable tech job

Recommended: Conventional Loan

With 5% down ($17,500), Marcus gets better rates and can remove PMI once he hits 20% equity.

Why This Works:

  • Excellent credit qualifies for best rates
  • PMI is removable at 20% equity (saves money long-term)
  • Higher loan limits support his budget
  • Can pursue aggressive equity building strategy

James: Active Duty Military

Profile: Navy veteran, credit score 680, $15,000 saved, looking at $320,000 homes near Fort Worth

Recommended: VA Loan

No down payment required, no PMI, and his $15,000 covers closing costs with money to spare.

Why This Works:

  • Zero down payment preserves savings for emergencies
  • No monthly PMI saves $200+ per month
  • Competitive rates for military members
  • Can use remaining savings for furniture/moving

The short version

  • FHA fits lower credit scores (580+) and smaller down payments (3.5%)
  • Conventional loans get the best rates with strong credit, and you can drop PMI at 20% equity
  • VA loans give military families 0% down and no PMI, hard to beat
  • USDA loans offer 0% down in eligible rural areas outside the city
  • Use the PMI calculator to see what removing it early could save you
  • DFW programs can add down payment help and a tax credit on top

Ready to Get Pre-Approved?

Here's what to look at next now that you know your loan options

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