Homeownership – 21 min read

How to Get a Mortgage in Texas 

Looking to get a mortgage in Texas but don’t know where to start? We got you—here’s everything you need to know.

Homeownership – 21 min read

Texas is one of the best states in the country—and we’re not just saying that. In fact, more than 884,000 people have started calling Texas their home since 2020. Not only does it have cowboys and astronauts walking on the same streets, but it also offers a booming economy with plenty of jobs waiting for you, more stand-up comedy clubs than you knew you needed, and some of the finest jiujitsu in the world. Whatever you’re interested in, Texas can offer it—Jumbo size. This vast and plentiful state is well-matched with an abundance of hundreds of mortgages, and down payment assistance grants and programs for you to take advantage of if you qualify.

Now that we know everything that Texas offers you must be eager to buy your first home in the Lone Star State. Getting a mortgage, which is the first step of home buying, is one of the biggest financial steps you'll ever take in your life. However, the internet is filled with half-truths, confusing examples, or only half-explained answers, leaving homebuyers with more questions than solid answers. Here we’ll dive into everything you need to know to get a mortgage in Texas.

By the end of this article, you'll know the five steps you'll have to take to get a mortgage in Texas:

• Figuring out your mortgage affordability (a.k.a. your budget)

• Understanding the types of mortgages available

• What to do if you’re applying for a mortgage with a partner

• How to apply for your loan

• How to get your mortgage pre-approval

Are you working on financing your first home? Get a great rate on your mortgage while being matched with up to $30,000 in first-time home buyer grants with Dwelling. Find out how much you qualify for today.

A quick overview of the importance and benefits of a mortgage in Texas

Starting the exciting adventure of buying a home in Texas involves some important steps and things to keep in mind—from assessing your finances to choosing the house of your dreams. 

One crucial part of this process is getting a mortgage, which is basically a way to borrow the money you need to buy your home and pay it back over time—usually in installments across 10 to 30 years. 

The reason getting a mortgage is such a big deal is that it's like the financial engine that drives your home buying journey. It’ll also be the longest and biggest loan you’ll probably request in your life—you want to get it right! 

In Texas, where the real estate scene is notoriously competitive, having a mortgage pre-approval can put you ahead of other keen homebuyers. A mortgage pre-approval tells sellers that you're a serious and qualified buyer. It also helps you understand your budget for house hunting. 

The type of mortgage you choose, like a conventional mortgage, a government-backed mortgage, or a fixed-rate or adjustable-rate mortgage, can have a massive impact on your long-term financial stability. 

Understanding your mortgage options and their terms and conditions is essential for making smart choices that match your money goals and ensure a smooth transition into homeownership. 

Mortgages 101: Understanding the basics of mortgages

Before we tell you the five steps you need to take to get a mortgage in Texas, we need to explain exactly what a mortgage is. 

In basic terms, a mortgage is the money you get from a bank to buy your primary residence. You’ll then agree to a payback schedule—usually 30 years—and that’s what sets the terms and amounts that you’ll be paying monthly for the loan. 

The four factors that you need to take into consideration when you budget for your monthly mortgage payments are P.I.T.I.

Principal: the actual amount you borrowed from the bank. For example, a $350,000 house with a 3.5% down payment ($12,250) would require you to borrow $337,750—this is your principal. This is the amount that will be used to calculate the interest rate. 

Interest: what your bank charges you for lending you the money. If you’re a high risk for the bank (like if you have a lower credit score), you’ll get a higher interest rate to compensate for the risk they take on lending you the money. 

Taxes: property taxes are used by the government to maintain the infrastructure and community you’ll be moving into. These taxes are typically calculated on the assessed value of the home. If you pay less than 20% down payment, lenders are required to roll them (and your insurance) into your mortgage payments by adding them into an escrow account, so that when the payment is due the lender pays the municipality directly.  

Insurance: property insurance is money you pay so that if something happens to your home (a tree falls on your house, for example) you can get compensation based on a covered claim. 

Although your mortgage is technically only your interest and principal, you still need to account for the taxes and insurance to budget properly as these are required payments. 

Depending on the mortgage of your choosing you’ll be paying a fixed interest mortgage rate or an adjustable interest rate. 

A fixed-rate mortgage means that the interest you’ll be paying on your mortgage will remain the same until you finish paying the loan. This is good for those who like to plan for the future and would like a stable monthly payment—although keep in mind that taxes and insurance will be adjusted annually. 

An adjustable-rate mortgage is a form of mortgage that allows you to keep a fixed rate for a set amount of years (for example, the first 5 years of your loan) and after that it will be readjusted every couple of years. This is best suited for borrowers who prefer lower payments in the short term and are willing to risk possibly paying more in the future.

Now that you know how a mortgage works, we can learn more about how you can get one in Texas. 

The 5 steps to get a mortgage in Texas

Possible infographic suggestion to show all the steps needed (overview). 

The process of getting a mortgage can take anywhere from a few days to a few weeks. To ensure getting your mortgage is done as quickly and correctly as possible, you’ll want to follow these five steps.

1. Knowing your mortgage affordability (a.k.a. your budget)

Before you jump onto real estate websites and start scrolling for your first home in Texas, it's vital to have a firm grasp of your financial capabilities. You need to understand your savings, income, credit score, the value of your assets, and the budget you have for buying your home. These are exactly the things that lenders will look at when assessing your mortgage approval. 

Determining your budget

Understanding your budget is the first step you need to take. This means taking a closer look at your financial situation to understand how much you can comfortably allocate towards a down payment (usually at least 3.5% of the home price), your monthly mortgage payments, and other home-upkeeping bills like utilities. 

Evaluating your budget is a fundamental exercise as it not only sets the parameters for your home search but also ensures you're venturing into this significant investment with a clear financial plan.

In case you’re struggling with saving enough money for a down payment, you can apply for down payment assistance. These are programs that provide you with grants and loans so you can jump this first hurdle into homeownership without having to wring your wallet off every cent. 

Want some help to calculate how much of your budget can go to becoming a home buyer? We got you. Try this handy home buyers’ calculator to understand how much you can afford. 

2. Understanding the types of mortgages available

Once you know your mortgage affordability, you can start looking at the different types of mortgages available. 

We’re sharing the most popular ones, but there are a few more that suit specific homebuyers. For example, for those over 62 years old who already own their home outright, Reverse Mortgages are a good option. For those looking to get a luxurious home in Texas, Jumbo Loans have their name written all over them. 

Conventional Mortgages: for those with a strong credit history

Conventional loans are a popular choice for first-time home buyers. They're not backed by the government but are provided by private lenders and often require a down payment ranging from 3% to 20% of the home's purchase price. 

What's great about conventional loans is the freedom they give you to tailor your mortgage to your specific needs. You can choose between fixed-rate mortgages (the 30-year, fixed-rate is the most popular option), which offer the comfort of consistent interest rates over time. Or, you can go for adjustable-rate mortgages, with lower initial rates that might increase or decrease later. 

Conventional loans also come in two flavors: conforming and non-conforming.

• Conforming loans adhere to strict standards set by the Federal Housing Finance Agency (FHFA) and can be purchased by government-sponsored enterprises like Fannie Mae and Freddie Mac. These standards include guidelines for credit, debt, and loan size. 

• Non-conforming loans, on the other hand, don't quite meet these standards. Non-confirming loans (like the Jumbo Loan which exceeds loan size standards) may carry some additional risk for lenders but can provide an option for those seeking mortgages outside of the FHFA standards. 

Whether you're after stability, customization, or unique solutions, conventional loans offer a friendly and practical path to homeownership in Texas.

Fact sheet on conventional mortgages:

✅ You need a credit score of at least 620

✅ Most lenders offer this mortgage option

✅ Great for first-home buyers, but you can also use them for a secondary or vacation home, as well as for rental property investments

✅ If you put less than 20% of down payment you’ll need to get private mortgage insurance (PMI)

✅ You can put a down payment of as little as 3%

Government-insured mortgages

FHA Mortgages (Federal Housing Administration): best for those with low credit scores or a low down payment budget

FHA loans are backed by the Federal Housing Administration and offer buyers a chance to buy a home with lower credit, starting at 580 with a 3.5% down payment or 500 with a 10% down. 

However, since you’re not putting 20% down, you’ll need to pay mortgage insurance premiums for the life of the loan, which protects lenders in case the borrower fails to pay. 

Good to know: Keep in mind that FHA loans have lower borrowing limits compared to conventional conforming loans.

VA Mortgages (Veterans Affairs): best for veterans

VA loans, guaranteed by the U.S. Department of Veterans Affairs, offer a fantastic opportunity for U.S. military members (active duty, veterans, National Guard, and Reservists) and their spouses. 

The great news: with VA mortgages you don’t need to put a minimum down payment, pay mortgage insurance, or meet strict credit score requirements. There is, however, a one-time funding fee. This ranges from 1.25% to 3.3% when you close the loan.

USDA Mortgages (United States Department of Agriculture): best for those moving to the countryside

The U.S. Department of Agriculture backs the USDA loans, which are a helpful option for those with moderate to low-income buyers looking to purchase homes in rural areas (cue “Beautiful Texas” by Willie Nelson). 

The best part is there's no strict credit score or down payment requirement. However, they come with fees to support the program.

Fact sheet on government-backed loans:

✅ There are additional costs for FHA mortgage insurance, VA funding fees, and USDA guarantee fees

✅ Much more flexible credit and down payment requirements

✅ Limited loan limits

✅Allows borrowers who wouldn’t qualify for other loans to get a loan

✅ Limited to veterans, those in rural areas, or those with low credit scores and down payment money

All of the previous loans discussed can come with either fixed-rates or adjustable-rates. To help you decide which is best for you here are their pros and cons:

Fixed-rate mortgages: best for those looking for stability in their budgeting

Pros and cons of fixed-rate mortgages

❌ Interest rates can be higher than adjustable-rate loans

✅ Fixed monthly mortgage payments

❌ You’ll need to refinance if you ever want to lower the rate

✅ Great for budgeting 

Adjustable-rate mortgages (ARM): best for those looking to sell or refinance before the readjustment rate date

Pros and cons of adjustable-rate mortgages:

❌ The constant risk of your interest rates going up

✅ Potential for lower initial interest rates

❌ Harder to budget for

✅ You could pay less overtime if interest rates go down

3. What to do if you’re applying for a mortgage with a partner

If you’re applying with a spouse, family member, or even a roommate, there are a few things to keep in mind. 

First, if you have strong credit and a stable income, there may be no need to do a joint mortgage application, especially if your spouse doesn’t have a great credit score or lacks a stable income. However, this may impact how much mortgage you could get approved for. Check with your broker to help you select the best strategy for your situation.  

Secondly, even if you don’t apply with your spouse for the mortgage you can still add them to the title so you’re both proud owners of the property.

Finally, whoever is applying for the loan will be the one who needs to meet its requirements. So, if your spouse has a great income but a bad credit score, you can not use your credit score and their income if you’re the one asking for the loan. 

With those clarifications out of the way, let’s look at joint mortgage applications. 

What is a joint mortgage?

A joint mortgage, also known as a co-borrower mortgage, is when two or more people (typically a couple or family members) jointly apply for a home loan. All co-borrowers are equally responsible for the mortgage, including making payments and fulfilling the terms of the loan. Although there isn’t a legal limit for the amount of co-borrowers, some lenders might have restrictions. 

Joint mortgages can make it easier to qualify for a larger loan, as the income, credit, and assets of all co-borrowers are considered. However, it also means that all co-borrowers share the financial and legal responsibilities and liabilities of the mortgage.

To obtain a joint mortgage each co-borrower completes an individual loan application, or they can all fill out a joint application. If approved, the loan is issued in the names of all applicants, with each person sharing the responsibility for repaying the debt.

Types of joint ownership

When you and yours sign a joint mortgage it doesn’t mean you’ll all share the same ownership of the house. The level of ownership and rights of survivorship are determined during the joint mortgage application. 

These are some common types of joint ownership:

Tenancy by entirety: Typically reserved for married couples or registered domestic partners, providing equal ownership and automatic ownership transfer to the surviving partner in case of death.

Tenancy in common: Co-owners can have unequal ownership percentages and can leave their ownership to someone other than their spouse or partner upon their death.

Joint tenancy loan: Allows three or more co-borrowers to share equal ownership of the property, with the possibility of an automatic ownership transfer to the surviving owners.

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Clarification Box: What’s the difference between co-borrowers and co-signers?

A co-signer is someone who helps a borrower to qualify for a loan or to get better terms thanks to the co-signer’s financial assets. If the loan defaults, the co-signer must pay, they are responsible for the loan too. However, they don’t have any ownership of the property. 

A co-borrower is best for spouses, partners, or family members who want to share both responsibility and ownership of the property.

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4. Applying for your home loan!

To get a mortgage there are some key requirements you need to meet—they’re similar to your pre-approval requirements but the lender will go more in-depth to ensure you’re eligible and able to afford the loan. 

It’s important to always check the requirements for your loan as they can vary slightly depending on the type of mortgage and lender. 

Financial requirements:

To get a loan you’ll need to provide some documentation proving you’ll be able to repay the loan. These are similar to your pre-approval financial requirements, but this time you’ll need to go more in-depth and the banks or institutions will check everything with a magnifying glass. You’ll be asked to provide:

• Income and financial history verification: This includes tax returns, pay stubs, W-2s of the previous two years if you’re employed, or year-to-date profit and loss statement if you're self-employed

• Asset verification: This includes bank statements, information about other assets, and available money—or assistance—for a down payment

Wondering about down payment assistance? We got you. You can check the top eight down payment assistance programs in Texas here. 

• Other financial requirements: Recurring debts and rental history

Credit score requirements:

Most loans have a minimum credit score requirement, however, they can vary. What’s important to know is that if you have a bad credit score you don’t need to panic, there are ways to improve it so you’re loan-ready. 

Find out your FICO score and credit improvement tools for free

During the loan process, you’ll need to provide authorization to the lender to check your credit report.

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Clarification Box: Should I use my FICO score or my VantageScore for a mortgage loan?

90% of top lenders use FICO scores. Both scores indicate your ‘creditworthiness’ but they have different criteria. For example, the FICO score uses a 45-day span, while VantageScore uses 14 days to assess your credit. 

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Here are the most common credit score requirements needed for the top-used loans:

• Conventional home loan: Minimum credit score of 620

• FHA home loan: Minimum credit score of 580, however, some lenders might allow a score as low as 500 with a 10% down

• USDA home loan: Minimum credit score of 640

• VA home loans: The U.S. Department of Veterans Affairs doesn't ask for a minimum credit score, but most lenders require 620

Debt-to-income (DTI) ratio requirements

The government has set a rule that your total debt payments shouldn't be more than 43% of your income if you want a qualified mortgage (that meets certain criteria to protect the lender). 

If your DTI is higher than that, there are still other loans you can get. However, the lender might ask you more questions to make sure you can pay, and the interest rates might not be the same as those for Qualified Mortgages. 

Other documentation

Social security number, driver’s license, and some loans might ask that you provide a residence card or proof of nationality. 

For the mortgage to be finalized you’ll need to provide your pre-approval letter and property information to ensure it fits with the loan’s requirements. 

5. Getting your pre-approval

The benefits of a pre-approval are twofold: the pre-approval not only narrows down your house-hunting focus to properties within your price range but also establishes your credibility as a serious buyer for sellers. 

Although it’s nice to get the pre-approval, it doesn’t ensure you’ll get the mortgage. If your financial situation changes or the property you end up finding does not apply to the pre-approval mortgage conditions then your mortgage could be denied. 

How to get your pre-approval 

The steps to pre-approval sound relatively straightforward: gather financial documents, choose a mortgage lender, fill out the application, and wait for the lender's assessment. However, each of these steps takes time and you’ll need to be advised by a professional to avoid mistakes. 

If you’re looking to make the process easier, check Dwelling and the various resources we offer homebuyers, from FICO credit score calculators to down payment assistance matching, and more. Take a look at Dwelling today, and start your journey to home ownership. 

Documentation required to get pre-approval:

• Proof of income: you need to send recent pay stubs, W-2 forms for those employees or 1099 forms for the self-employed, tax returns from the last two years, and proof of any extra money you make, like from alimony or bonuses

• Proof of assets: lenders check your bank and investment accounts to ensure you have enough money for the down payment and closing costs, and still have savings. If your down payment is less than 20% of the home's price, you may need private mortgage insurance (PMI) to protect the lender.

• A good credit score: most lenders will ask for a minimum FICO score of 620 for conventional loans and 580 for Federal Housing Administration loans, but always double-check the requirements for the mortgage that you want

• Employment history verification: by providing pay stubs, but some lenders may also call the borrower’s place of employment. If you’re self-employed you’ll need to provide other information to prove the stability of your income and provide all the information about your business.

• Other documentation: a driver’s license, Social Security number, and authorization to the lender to check your credit report 

Once you have all the documentation you’ll be able to approach the lender of your choice and start the mortgage application process.

The mortgage pre-approval normally takes between two weeks to two months. Once you receive the pre-approval letter it will be valid for 60 to 90 days—this means you’ll need to time things right and start your house hunt fast. 

Apply for your mortgage and get ready to buy your dream house in Texas

Applying for a mortgage is one of the most important steps you’ll take in your financial life. Being properly prepared to apply, and understanding the different types there are is key to making the best decision for your financial standings. 

What are you waiting for? Texas is ready for you to throw down your welcome mat. If you don’t have a mortgage yet, you can apply for one through Dwelling. We’ll match you with home-buying grants and help you get pre-approved for a mortgage almost instantly.

Buying a
home is closer than you think.