What Credit Score Do You Need for a Conventional Loan in Texas?

Wondering what credit score you need for a conventional loan in Texas?

Many lenders require a minimum of 620. However, if your score is 740 or higher, you may qualify for more attractive interest rates and better pricing.

Keep reading to learn what conventional loans are and the minimum credit scores they require. I’ll also explain how your credit affects your loan terms and how to boost your score for higher chances of approval.

What Are Conventional Loans?

Conventional loans are mortgages not backed by the U.S. federal government. Because there’s no government guarantee, lenders set stricter eligibility requirements than government-insured loans. [1]

These loans are the most common mortgage type, and they’re great for homebuyers with good credit, a steady income, and a low debt-to-income (DTI) ratio. You can choose a fixed or adjustable rate and skip private mortgage insurance (PMI) with a 20% down payment.

For 2025, the conventional conforming loan limit for most single-family properties in Texas is $806,500. Loan amounts above this limit fall under the jumbo loan category. [2]

You may use a conventional loan to finance a primary residence, second home, rental unit, or investment property, giving you more flexibility than government-backed loans (which only allow primary residences).

Minimum Credit Scores for Conventional Loans in Texas

Conventional mortgages follow the guidelines set by Fannie Mae and Freddie Mac. These are government-sponsored enterprises (GSEs) under Federal Housing Finance Agency (FHFA) oversight that buy and guarantee most conventional loans. 

They set rules to determine minimum credit scores, down payment requirements, loan limits, and overall loan costs. Both Fannie Mae and Freddie Mac require robust credit profiles for loan approval.

According to Fannie Mae’s Selling Guide, here are the general credit score requirements for manually underwritten conventional loans. [3]

• 620 for fixed-rate loans
• 640 for adjustable-rate mortgages (ARMs). The required score could be higher, depending on the loan’s loan-to-value (LTV) ratio and other risk factors.

Lenders may require strong compensating factors, such as sizable savings, a lower debt-to-income ratio, and a stellar payment history, depending on your credit score and overall financial profile.

Pro Tip: Aim for a score of 740 or higher to secure the most favorable rates and loan terms, as lenders see you as a lower-risk borrower. An outstanding credit score indicates that you make on-time payments and manage your finances properly, leading to a smoother approval process and better loan pricing.

Lender-Imposed Credit Score Overlays

Loan requirements, including credit score, down payment, and reserve rules, may vary by lender.

While Fannie Mae’s guideline minimum for conventional loans is 620, many lenders apply their own credit overlays, which means they require higher scores and apply stricter terms to reduce the risk of default in certain financial situations. [4]

Lenders usually require:

• 700+ credit score for investment properties, 2-4 unit properties, and second homes
• 700+ credit score for jumbo loans, based on the borrower’s down payment, income stability, and overall financial strength [5]

Recent Fannie Mae Update to the Credit Score Requirement

Starting November 16, 2025, Fannie Mae no longer requires a fixed minimum credit score for loans evaluated through Desktop Underwriter (DU), its automated underwriting system (AUS). [6]

Previously, DU enforced a 620 minimum score. After the update, it now reviews the borrower’s full credit and financial profile to determine eligibility. 

DU comprehensively analyzes multiple risk factors, such as the borrower’s income, assets, savings, DTI, and property details. Still, you have much higher odds of approval with a solid score.

How Your Credit Score Impacts Your Loan Application and Terms

Your credit score is one of the biggest factors lenders review when determining your loan eligibility. It reflects your financial habits, like how you manage payments and handle debt.

Lenders take on more risk with conventional home loans, so they prefer creditworthy borrowers with strong credit profiles capable of making house payments on time.

• With a higher credit score, you qualify for more competitive interest rates. Even a 0.5% difference translates into thousands of dollars in savings over the life of a loan.
• Your score also affects your loan-level price adjustment (LLPA), a fee Fannie Mae and Freddie Mac charge to conventional loan borrowers. The fee amount depends on the borrower’s risk level. An outstanding score, along with a low LTV ratio, may significantly reduce your upfront fees and total loan costs. [7]
• A stronger score may also lead to lower PMI premiums, reducing your monthly payments until you reach 20% equity.

Comparison of Minimum Credit Scores Between Conventional and Government-Backed Loans

Here’s a quick chart comparing minimum credit scores for different loan types. [8]

Other Conventional Loan Requirements

In addition to your credit score, most lenders consider the following factors to determine whether you’re eligible for a conventional loan. [9]

• Debt-to-income ratio: Below 36% DTI ratio, though lenders sometimes allow up to 50% DTI with strong compensating factors
• Down payment: Minimum of 3% down payment, depending on your credit profile and loan type. For example, borrowers with lower credit scores or those applying for a jumbo loan may need larger down payments. A 20% down payment means you don’t have to pay for PMI. A bigger down payment can also improve pricing and reduce overall loan costs.
• Reserve funds: Months of cash reserves, depending on the loan type and risk scenario
• Proof of income and employment: W-2s, pay stubs, tax returns
• Financial asset documentation: Savings, checking, retirement accounts, and other assets
• Residential history: Clear documentation of where you’ve lived for the past 2 years

How to Improve Your Credit Score Before Applying for a Loan in Texas

In a recent thread from the First-Time Homebuyers group, several members expressed that borrowers with lower credit scores often get high interest rates and pay hefty mortgage insurance when applying for conventional loans. [10]

That means it's best to improve your credit first before sending any loan application, rather than risk getting unfavorable terms or even being denied.

If you have limited or no credit history, keep these tips in mind to boost your credit. [11]

• Get a secured credit card to establish a payment record. You’ll have to deposit a certain amount, which serves as collateral on the card to reduce lender risk.
• Apply for a store credit card, ensuring you never miss a payment.
• Take out a credit builder loan, where you make monthly payments and you receive the funds once you’ve fully paid the loan.

If you already have a credit history and you want to raise your score, follow these steps:

• Check your credit report and dispute any errors with the credit bureaus.
• Always pay on time and in full. It’s a good idea to set up automatic payments to avoid missed or late payments.
• Pay off existing debts to lower your DTI ratio and reduce your credit utilization rate.
• Don’t open new credit accounts or apply for multiple loans months before your loan application, as it will impact your credit score and DTI.

Get Preapproved for a Conventional Loan Today

Now that you know what credit score you need for a conventional loan in Texas, the next step is to find the right mortgage lender and get preapproved. Shop around and compare the terms of multiple lenders to get the best deal.

If you need help with the mortgage process, our loan officers at Texas United Mortgage will guide you through each step and help you discover the best financial solution for your situation.

Contact us today to start your conventional loan application!

Sources:

[1] Bankrate - What Is a Conventional Loan?

[2] U.S. Federal Housing - FHFA Conforming Loan Limit Values Map

[3] Fannie Mae - Selling Guide

[4] LendingTree - What Is a Jumbo Loan?

[5] Fairway Home Mortgage - What Credit Score Is Needed for a Mortgage?

[6] Fannie Mae - Selling Guide Announcement

[7] Investopedia - Understanding Loan-Level Price Adjustments

[8] Experian - What Credit Score Do I Need to Buy a House?

[9] Experian - What Is a Conventional Loan?

[10] Facebook - First-Time Homebuyers

[11] Consumer Financial Protection Bureau - What Are Some Ways to Start or Rebuild a Good Credit History?