How Much Down Payment Do You Really Need to Buy a House in Texas?

The idea that you need 20% down is one of the most persistent myths in real estate. Most Texas buyers put down far less — and many pay nothing at all. Here’s the complete breakdown of every down payment option available in Texas, plus the actual cash you’ll need to close.

Most Texas buyers purchase their home with 3–10% down — far less than the 20% myth suggests.

The 20% Down Payment Myth

Ask most Texans how much you need to put down on a house and they’ll say “20%.” On a $350,000 home — about the median price in greater Houston — that’s $70,000. It’s a staggering number that keeps thousands of qualified buyers on the sidelines for years.

Here’s the reality: the average first-time homebuyer in Texas puts down 6–7%. Repeat buyers average 17%. The “20% rule” wasn’t a legal requirement — it was a rule of thumb from a different era when the only way to avoid mortgage insurance was to start with significant equity. Today, there are loan programs with 0%, 3%, and 3.5% down options that are widely available and perfectly sound financing strategies.

Minimum Down Payment by Loan Type in Texas

Texas buyers have access to four major loan categories, each with different down payment minimums. Here’s the complete picture:

VA Loans: The Best Deal in Texas for Eligible Buyers

If you or your spouse served in the U.S. military, VA loans are the single best mortgage product available in Texas — no contest. Zero down payment, no PMI, competitive rates, and no maximum loan amount (though lenders may impose their own limits). Texas has one of the largest active-duty and veteran populations in the country, yet many eligible borrowers don’t use this benefit. If you qualify, this should be your first conversation with a lender.

FHA Loans: The First-Timer’s Workhorse

FHA loans are insured by the Federal Housing Administration and are particularly popular in Texas’s affordable markets — Fort Bend County, Harris County, and the outer DFW suburbs. The 3.5% minimum down payment is available to anyone with a 580+ credit score. The tradeoff is mortgage insurance premium (MIP), which in most cases stays for the life of the loan — making refinancing into a conventional loan once you have 20% equity the typical exit strategy.

Conventional at 3% — Not Just for First-Timers

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs allow qualifying buyers to put just 3% down with income at or below 80% of the area median. In many Texas counties, that income limit is surprisingly generous. Unlike FHA, PMI on conventional loans automatically cancels when equity reaches 20% — so you’re not locked into it for life.

Interactive: Down Payment Scenario Planner

Enter your target home price and credit score to see the exact down payment required — and your estimated total cash to close — across all four major loan types.

What PMI Actually Costs You in Texas

Private Mortgage Insurance is often presented as a dealbreaker. In reality, PMI on a Texas home typically costs 0.5–1.2% of the loan amount per year, automatically cancels at 20% equity, and can be eliminated earlier by requesting removal when you reach 20% via appreciation or extra payments.

The PMI Break-Even Analysis

The real question isn’t “should I avoid PMI?” — it’s “is it worth waiting years to save the larger down payment while home prices continue rising?” Consider this: a Texas buyer who waits two additional years to save from 5% to 20% on a $350,000 home might find that same home now costs $385,000 — meaning the “20% down” target moved from $70,000 to $77,000, and they spent two years in rental housing in the meantime.

PMI on a 5%-down purchase of a $350,000 home costs roughly $220/month. That’s less than many Texans spend on car insurance. And it goes away once you’ve built equity — either through mortgage payments, appreciation, or both.

Texas Down Payment Assistance Programs

Texas has two major state-backed programs specifically designed to help buyers cover the down payment — and they’re more accessible than most people realize.

How Much Cash Do You Actually Need to Close in Texas?

Here’s where buyers get blindsided: the down payment is not the only cash you need at closing. Texas has some of the highest closing costs in the country relative to national averages — largely driven by property tax escrow requirements and title insurance conventions.

Your total cash-to-close in Texas typically includes:

• Down payment — 3%–20% of the purchase price
• Closing costs — typically 2–3% of the loan amount in Texas (lender fees, title, survey, appraisal)
• Prepaid items — homeowners insurance premium (usually 1 year upfront), property tax escrow (2–3 months), and prepaid mortgage interest (pro-rated for remaining days in closing month)
• Option fee — Texas-specific. The Option Period fee is typically $100–500 paid directly to the seller for the right to terminate the contract. This is credited back at closing but must be available upfront.
• Earnest money — 1% of the purchase price is standard in Texas, applied toward down payment at closing
• Inspection fees — $400–600 for standard inspection, paid before closing

Example: Total Cash to Close on a $350,000 Texas Home

Estimates only. Actual closing costs vary by lender, county, and transaction specifics. Earnest money shown as credited back at close.

Strategies to Lower Your Down Payment in Texas

1. Use Down Payment Assistance (TSAHC or TDHCA)

Already covered above — but worth repeating. These programs are underutilized because many buyers don’t know they exist. If your household income is under the county limit (often $100,000–$130,000 in Houston and DFW markets), you very likely qualify for at least one program.

2. Ask for Seller Concessions

In slower Texas markets or with motivated sellers, you can negotiate seller concessions — where the seller pays 2–3% of closing costs, allowing you to preserve more cash for the down payment. The purchase price stays the same on paper; the seller simply pays some of your closing costs at the table. FHA allows up to 6% in seller concessions; conventional allows 3–6% depending on LTV.

3. Use a Gift Fund

FHA and conventional primary residence loans allow 100% of the down payment to come from a documented gift. A signed gift letter from the donor (must be a family member for conventional; FHA is broader) is required. This is entirely legitimate and widely used by Texas first-time buyers receiving family help.

4. Lender-Paid PMI (LPMI)

Some lenders offer to pay your PMI upfront in exchange for a slightly higher interest rate — eliminating the monthly PMI line item. If you plan to stay in the home long-term, this can make sense. If you plan to refinance or sell within 5 years, standard PMI that cancels at 20% equity is usually the better deal.

5. 80/10/10 Piggyback Loan

Put 10% down, take a primary 80% conventional mortgage, and get a 10% second mortgage (HELOC or fixed second). This combination avoids PMI entirely without needing 20% down. Requires qualifying for two loans simultaneously and a strong credit profile. More complex but effective for buyers with 10%+ saved who want to avoid PMI costs.

Texas-Specific Considerations

The Texas Homestead Exemption

Texas’s homestead exemption reduces your assessed taxable value by $100,000 for school district taxes (as of 2023 legislation). File with your county appraisal district within the first year of ownership. This can save $1,200–$2,500/year depending on your local school tax rate — a legitimate ongoing benefit of Texas homeownership that partially offsets the high property tax burden.

MUD Districts in Houston’s Suburbs

Municipal Utility Districts (MUDs) are common in Fort Bend, Harris, Brazoria, and Montgomery counties. MUD taxes are assessed on top of standard county/school taxes and can add 0.5–1.5% to your effective property tax rate. Always verify whether a target property is in a MUD before finalizing your budget — it can meaningfully affect your monthly payment. Your lender is required to disclose this at application.

Texas Section 50(a)(6) and Cash-Out Rules

Texas has unique home equity laws under Section 50(a)(6) of the Texas Constitution. Cash-out refinances are capped at 80% LTV (you must retain at least 20% equity) and there are other restrictions that don’t apply in most other states. This doesn’t affect your purchase, but it’s worth knowing when planning your long-term equity strategy.

USDA Eligibility in Texas

USDA loans — 0% down — cover a surprising portion of Texas geography, including outer suburbs of all four major metros. Portions of Fort Bend County, Brazoria County, and outer Collin/Denton counties (DFW) may qualify. Check the USDA eligibility map for your target address before ruling this out.

VA Loan Assumptions in Texas

VA loans are assumable — meaning a buyer can take over the seller’s existing VA loan at the original interest rate. With many Texas homeowners locked into 2020–2021 rates of 2.5–3.5%, finding a VA assumable property could mean stepping into a below-market rate without requiring VA eligibility yourself (assumptions by non-veterans are possible but complex). Ask your agent specifically about assumable VA properties if rates remain elevated.

Related Texas Mortgage Guides

• FHA vs. Conventional vs. VA Loan in Texas — Full Comparison
• What Credit Score Do You Need to Buy a House in Texas?
• How Much House Can I Afford in Texas?
• What Are Closing Costs in Texas? Complete Buyer Breakdown
• First-Time Homebuyer Complete Roadmap for Texas
• Pre-Qualification vs. Pre-Approval in Texas — What’s the Difference?