Unfortunately I don't remember the way Text Edit behaved with Sierra (now on High Sierra), but I see what you mean. In actuality, sometimes it depends on the format of the document. I just tried Text Edit with some documents, and for ones which are .txt, yes, the screen which opens is rather small. in that only part of the document is visible. Without resizing, as the op noted, one needs to scroll down to see more. For one of the documents, though, with a format as .rtfd, it did open the document with a larger amount of text, at least vertically. But with a format as .rtf, same behavior as ones with .txt.
I did not see any Text Edit Preference setting to change that behavior. Using Microsoft Word 2016 to open such documents, however, they would open using the entire screen.