Beyond the VA Loan: A Central Texas Buyer's Guide to Conventional, FHA, USDA, and First-Time Buyer Financing

By Malcolm Davis | HomeVets Realty LLC | August 10, 2026 "When Experience Matters, Hire A Real Estate Veteran"

If you've followed my posts for any length of time, you know I spend a lot of ink on VA loans. That makes sense — I'm a retired Staff Sergeant working with a lot of active duty families, veterans, and Department of Defense contractors around Fort Hood, Killeen, Harker Heights, and the greater Central Texas corridor. The VA loan is one of the most powerful benefits this country offers, and I'll never stop talking about it.

But here's the truth: not everyone reading this qualifies for one. I get calls every week from teachers, nurses, first responders, small business owners, and civilian families who love the idea of buying a home in Central Texas but assume the only "good" loan options belong to veterans. That's simply not the case. There is a full toolbox of financing options available to non-military buyers, and several of them are just as competitive — sometimes even better suited to a particular buyer's situation than a VA loan would be.

So today, I want to slow down and walk through the other major loan programs available to buyers in our market: conventional loans, FHA loans, USDA loans, and a handful of state and local first-time homebuyer programs that don't get nearly enough attention. My goal is simple — by the end of this post, you should have a clear sense of which door might be the right one for you to walk through.

Why This Conversation Matters Right Now

Central Texas continues to be one of the more resilient housing markets in the state. Fort Hood's economic footprint, the ongoing growth around Killeen-Temple, and steady population inflow into the I-35 corridor mean demand isn't going anywhere. Rates have been easing off their recent highs, and more lenders are getting creative with down payment assistance to bring buyers off the sidelines. If you've been waiting for the "right loan" to make a move, this is a good time to actually learn what's out there instead of assuming you don't qualify for anything.

Conventional Loans: The Workhorse of the Mortgage World

A conventional loan is any mortgage not insured or guaranteed by a government agency (that rules out VA, FHA, and USDA). Instead, conventional loans are backed by private lenders and typically sold to Fannie Mae or Freddie Mac on the secondary market. This is the most common loan type in the country, and for good reason — it's flexible.

Key features:

• Down payments can be as low as 3% for qualified first-time buyers (Fannie Mae's HomeReady and Freddie Mac's Home Possible programs), though 5-20% is more typical.
• No upfront funding fee like VA loans, and no upfront mortgage insurance premium like FHA loans.
• Private Mortgage Insurance (PMI) is required if you put down less than 20%, but unlike FHA mortgage insurance, PMI automatically cancels once you reach 78% loan-to-value, and you can request cancellation at 80%.
• Loan limits are higher in many cases, which matters if you're looking at larger homes or new construction in growing areas like Salado or the northern parts of Bell County.
• Credit score requirements are generally a bit higher than FHA — most lenders want to see at least 620, though the best rates go to buyers in the 740+ range.

Who this fits best: Buyers with solid credit and steady income who can put down at least 5%, or first-time buyers who qualify for one of the 3% down programs. If you have strong credit but don't want to pay the ongoing mortgage insurance premium that comes with FHA, conventional is usually the better long-term play because PMI goes away — FHA insurance on a low-down-payment loan often does not.

FHA Loans: The Bridge for Buyers Building Credit

The Federal Housing Administration doesn't lend money directly — it insures loans made by approved lenders, which allows those lenders to accept more risk. That translates into more forgiving qualification standards for buyers.

Key features:

• Down payments as low as 3.5% with a credit score of 580 or higher.
• Buyers with scores between 500-579 may still qualify with 10% down.
• More flexible debt-to-income ratio requirements than most conventional loans.
• Gift funds from family members can cover the entire down payment in many cases.
• Requires both an upfront mortgage insurance premium (currently financed into the loan) and an annual mortgage insurance premium paid monthly, which in most cases lasts for the life of the loan unless you put down 10% or more.

Who this fits best: Buyers who are still building credit, have had a bump in the road financially in the last few years, or simply don't have a lot of cash reserves for a bigger down payment. I see this loan work well for younger buyers, buyers coming out of a divorce or job transition, and first-generation homebuyers who haven't had the chance to build up savings yet.

One thing I always tell my FHA clients: because the mortgage insurance sticks around, it's worth having a conversation about refinancing into a conventional loan once you've built equity and your credit has improved. That's a strategy conversation, not a sales pitch — I want you to actually save money over time, not just close a deal.

USDA Loans: An Overlooked Option for Rural and Semi-Rural Buyers

This is the one that surprises people the most. The USDA Rural Development loan program offers zero down payment financing for buyers purchasing in eligible rural and suburban areas. And here's the part people don't expect — a lot of Central Texas actually qualifies. Areas outside the immediate city limits of Killeen and Temple, parts of Coryell County, and stretches of Bell and Lampasas counties often fall inside USDA-eligible zones.

Key features:

• No down payment required.
• Below-market mortgage insurance costs compared to FHA.
• Income limits apply — USDA loans are designed for low-to-moderate income households, with limits that vary by county and household size.
• The home must be in a USDA-designated eligible area, and it must be your primary residence.
• Competitive fixed interest rates, often similar to or better than conventional rates.

Who this fits best: Buyers looking just outside the city core who meet the income requirements and want to avoid a down payment altogether. If you've been house hunting and kept finding yourself looking at properties a little further out from town, it's worth checking the USDA eligibility map before assuming this program doesn't apply to you. Many buyers never even ask about it because they assume "rural" means a location much farther out than it actually does.

Down Payment Assistance and First-Time Buyer Programs

Texas offers several state and local programs that can be layered on top of an FHA or conventional loan to help with down payment and closing costs. These are worth exploring regardless of which loan type you choose:

• TSAHC (Texas State Affordable Housing Corporation) offers down payment assistance grants and second-lien loans, some of which don't have to be repaid.
• TDHCA (Texas Department of Housing and Community Affairs) My First Texas Home program provides down payment and closing cost assistance paired with a competitive first mortgage rate.
• Local city and county programs in Bell County and surrounding areas periodically offer homebuyer assistance for teachers, first responders, and municipal employees.
• Good Neighbor Next Door (HUD) offers a 50% discount on the list price of eligible homes for teachers, law enforcement officers, firefighters, and EMTs in revitalization areas.

These programs change eligibility requirements and funding availability fairly often, so this is exactly the kind of thing where working with someone who watches the market closely pays off. I stay on top of what's currently funded and what's not, because a program that was available six months ago may have used up its allocation, and a new one may have just opened up.

How to Actually Decide Which Loan Is Right for You

I get asked constantly, "Malcolm, just tell me which one is best." The honest answer is that it depends on four things:

1. How much you have saved for a down payment. Zero to minimal savings points toward USDA or FHA. More moderate savings opens up conventional options.
2. Your credit profile. Lower scores tend to do better with FHA. Stronger credit usually saves money with conventional loans due to no long-term mortgage insurance.
3. Where you're looking to buy. If you're eyeing a home just outside city limits, always check USDA eligibility before ruling it out.
4. How long you plan to stay in the home. If you expect to move again in a few years, minimizing upfront costs might matter more than optimizing for long-term mortgage insurance costs. If this is a longer-term home, the math shifts toward paying more upfront (or picking conventional) to save on insurance over time.

None of this replaces a real conversation with a loan officer who can run actual numbers based on your credit, income, and goals. What I can do as your agent is help you understand which programs might even apply to a specific property, connect you with lenders in Central Texas who work with each of these loan types regularly, and make sure your offer strategy lines up with the type of financing you're using — because sellers do look at financing type when they're comparing offers, especially in a competitive listing situation.

A Word on Working With Someone Who Understands All the Options

I built my business on the veteran community because that's where my own experience lives — 20-plus years in uniform, and years since then working alongside contractors and service members on this side of the fence at Fort Hood. But a good agent doesn't only know how to help the buyers who look like them. Some of the most rewarding closings I've had over the last couple of years have been civilian first-time buyers who came in assuming they didn't have good options, and left with keys in hand because we found the right loan product for their specific situation.

If you're a civilian buyer in Central Texas wondering whether now is the right time, or which of these paths makes the most sense for you, that's exactly the conversation I want to have. Bring me your questions, your credit concerns, your "I don't think I can afford this" doubts — let's actually look at the numbers together before you count yourself out.

Bottom Line

VA loans will always have a special place in what I do, but they're not the whole story. Conventional, FHA, USDA, and the various state and local assistance programs open the door to homeownership for a much wider range of buyers than most people realize. If you've been sitting on the sidelines because you assumed you needed a military benefit to make Central Texas homeownership work, I'd encourage you to reach out. There's very likely a path here for you too.

Malcolm Davis is a REALTOR® with HomeVets Realty LLC, serving Central Texas including Killeen, Harker Heights, Temple, and the greater Fort Hood area. When Experience Matters, Hire A Real Estate Veteran.