If you’re looking to buy a new house in Dallas and have a solid credit score, a conventional loan is your best option.
Unlike FHA and VA loans, conventional loans are easier to get approved. Plus, they’re more flexible and offer better terms and conditions.
While typical conventional loan requirements remain the same, each state/county has its own loan limits.
We have created this post to help you understand the Dallas conventional loan limits. After reading this post, it would be easier for you to contact any mortgage company in Dallas and apply for a conventional loan.
Let’s begin with the basics first…
Conventional Loan Explained
A conventional loan is a type of mortgage that is not backed by a government agency. These loans are guaranteed by the Federal National Mortgage Association, aka Fannie Mae.
Pros and Cons of Conventional Loans
Pros
- You can negotiate the loan fee
- Fixed rates protect against inflation, meaning your rates will stay the same even if they go up
- You can also benefit from creative financing
- They’re more flexible than any other type of home-financing loans available to date
- Comes in different types and sizes
- Offers an option to pay taxes and insurance (Escrow accounts)
Cons
- Because these loans are not backed by the government, the interest rates can be higher than FHA loans (interest rates are set by the lender)
- They require higher down payments than FHA loans
- More difficult to qualify for (there are more formalities)
Here are a few typical loan requirements you should follow before applying for a conventional loan in Dallas:
Conventional Loan – Requirements
Credit Score
Having a solid credit score increases your chances of getting conventional loans without the hassle. Your credit score depends on many things, including loan-payment punctuality, owed payments, and more.
The typical credit score limit falls between 300-850. The higher the score, the better.
In order to apply for a conventional loan in Texas, your credit score should be over 620. With a higher CS, you may qualify for lower interest rates and down payments.
DTI (Debt-To-Income Ratio)
Another typical conventional loan requirement is your DTI. You can calculate this by dividing your total monthly debt by your total monthly income.
Ideally, your DTI should not exceed 45% to increase your odds of being approved.
Speaking of down payment…
Down Payment
By definition, a down payment is a certain percentage of the total cost of a home purchased on credit. Buyers pay this amount to show their seriousness about their intention to invest in a property.
Down payments for a loan depends on:
- the type of home a buyer is interested in buying (primary/secondary home)
- the type of loan
The higher the down payment, the smaller the monthly payment you’ll have to pay. As far as down payments for conventional loans are concerned, it should at least be 3% of the total cost.
Private Mortgage Insurance
Because you can acquire a conventional loan for as low as a 3% down payment, PMI is also required.
You can either pay this amount lump sum at the time of closing or monthly with your mortgage. Get ready to pay higher PMI if your credit scores or down payment money is low.
Income Stability
Lenders may want to know about your income levels to gauge your ability to repay a loan. Even if you have a positive credit score, you may have to prove that you’re earning sufficient money to repay your monthly debts.
Conventional Loan Limits for Dallas, Texas
The Federal Housing Finance Agency (FHFA) set loan limits for Dallas, Texas.
The Texas conventional loan limits increased from $484,350 to $510,400 in 2021 for a one-unit home.
Do You Qualify for a Conventional Mortgage in Texas?
Conventional loans are one of the most popular mortgage types in the US. They are affordable and offer lower mortgage insurance costs. Not only this, but they can finance different property types, including investment homes and rentals.
To find out whether you qualify for this specific type of loan, get in touch with any reliable mortgage company in Dallas. They can tell you whether this loans type is the most appropriate choice, given your financial situation and future goals.
