Yes, you can use down payment assistance with a conventional loan. Programs like TSAHC, My First Texas Home, and local San Antonio programs all accept conventional as the first mortgage.
Conventional loans with 3% down pair well with DPA, and unlike FHA, the PMI drops off once you reach 20% equity — meaning your monthly payment decreases over time.
The combination of low down payment conventional + DPA grants gives you a lower long-term cost than FHA + DPA for buyers with good credit.
Why Conventional + DPA Makes Long-Term Sense
Conventional PMI drops off at 80% LTV automatically (or you can request removal at 80% with a new appraisal). FHA's MIP stays for the life of the loan unless you put 10%+ down. For buyers with 660+ credit, conventional + DPA often saves more money over 7-10 years than FHA + DPA, even though FHA has a slightly lower initial rate.
The key difference is simple: conventional mortgage insurance eventually goes away. FHA mortgage insurance is typically permanent unless you refinance or make a large down payment. When you combine that with a DPA grant that reduces your out-of-pocket costs, conventional becomes an even stronger option for buyers who plan to stay in their home for several years.
Conventional + DPA Example
Here is how conventional 3% down combined with a TSAHC grant looks on a $300,000 home:
- Home price:$300,000
- Conventional down payment (3%):$9,000
- Closing costs:$7,000
- Total cash needed:$16,000
- TSAHC grant (5%):$15,000
- Buyer's remaining cash needed:$1,000
- Monthly PMI (estimated):$80-120/month
But here is the best part: that PMI drops off in about 7 years once you hit 80% equity through payments and appreciation. After that, your monthly payment goes down by roughly $100/month and stays lower for the remaining life of the loan.
Conventional vs FHA + DPA — 10-Year Cost Comparison
Let us compare the total cost over 10 years for both loan options on a $300,000 home with DPA:
| Cost Factor | Conventional + DPA | FHA + DPA |
|---|---|---|
| Loan amount | $291,000 | $289,500 |
| Monthly payment (first 7 years) | ~$2,025 | ~$1,990 |
| Monthly payment (after PMI drops) | ~$1,925 | ~$1,990 |
| Mortgage insurance cost (10 yrs) | ~$8,400 | ~$20,000+ |
| Upfront MIP (FHA only) | $0 | ~$5,065 |
| Estimated total cost (10 years) | ~$242,000 | ~$253,000 |
That is a difference of roughly $8,000 to $15,000 over 10 years in favor of conventional + DPA for buyers with good credit. The savings come almost entirely from FHA's permanent mortgage insurance versus conventional's temporary PMI.
Credit Score Requirements
Conventional DPA programs typically require a 620+ credit score. This is higher than FHA's 580 minimum. Here is how it breaks down:
- 620+ credit score: Conventional + DPA is your best option. Run both FHA and conventional numbers side by side.
- 580-619 credit score: FHA + DPA is likely your better option. You likely won't qualify for conventional DPA programs in this range.
- 660+ credit score: Conventional + DPA almost always wins on long-term cost. You get the best rates and the lowest mortgage insurance.
If your score is 620+, ask your loan officer to run both FHA and conventional numbers with DPA. The difference in total cost may surprise you.
Which DPA Programs Accept Conventional
Most major Texas DPA programs work with conventional loans. Here is a quick breakdown:
- TSAHC — Yes, accepts conventional as the first mortgage
- My First Texas Home (TDHCA) — Yes, accepts conventional
- TDHCA Homes for Texas Heroes — Yes, accepts conventional
- Local San Antonio programs — Vary by city and county. Check with your lender.
Not all DPA programs work with every lender, so it is important to work with a loan officer who knows which programs pair well with conventional financing. The key is finding a lender that offers both the DPA program and conventional loans together.