The Texas housing market has been fueled by a wave of demand, with homes selling in a record 43 days as of the start of 2021, according to Texas A&M University’s Real Estate Research Center. If you’re a first-time homebuyer in the state, the Texas Department of Housing and Community Affairs and other organizations offer several ways to help you afford a home.
Texas first-time homebuyer loan programs
TDHCA My First Texas Home
For first-time homebuyers, the Texas Department of Housing and Community Affairs (TDHCA) offers the My First Texas Home program, a 30-year mortgage with a low interest rate and up to 5 percent in interest-free down payment assistance. You can obtain an FHA, VA or USDA loan through this program.
The assistance must be repaid when you sell your home, or refinance or pay off your mortgage. These funds are then reused to help other homebuyers.
You could be eligible for the program with a credit score as low as 620, but you must also meet the program’s income and purchase price requirements, which vary based on county. You must also take a homebuyer education course, available for free through Texas Homebuyer U.
This program is available to veterans as well as first-time buyers, or those who haven’t owned a home in the past three years.
TDHCA My Choice Texas Home
If you’re a first-time or repeat homebuyer, TDHCA’s My Choice Texas Home program offers a similar low-rate mortgage and up to 5 percent assistance to help cover your closing costs and down payment. This assistance is a zero-interest, no-monthly payment second mortgage.
In addition to an FHA, VA or USDA loan, you can also obtain a Fannie Mae HFA Preferred conventional loan through this program.
To qualify, your credit score can be as low as 620, but as is typical for these types of programs, you must meet income and purchase price limits.
TSAHC Home Sweet Texas Home Loan Program
The Home Sweet Texas Home Loan Program through the Texas State Affordable Housing Corporation (TSAHC) offers a 30-year fixed-rate mortgage and up to 5 percent down payment assistance, either as a grant or second mortgage. There’s no interest and no monthly payments on the second mortgage, and it’ll be forgiven after three years. (If you sell your home or refinance your mortgage before then, however, you’ll need to repay it.)
This program can be used to get a Fannie Mae HFA Preferred or Freddie Mac HFA Advantage conventional loan, an FHA loan, VA loan or USDA loan.
You don’t have to be a first-time homebuyer to be eligible, but you must have at least a 620 credit score and meet income and purchase price limits based on county, size of your household and whether you’re buying in a targeted or non-targeted area.
TSAHC Homes for Texas Heroes Program
If you work in a public service profession — such as a teacher, police officer or firefighter — or are an eligible veteran, you might qualify for TSAHC’s Homes for Texas Heroes Program. This program offers a 30-year mortgage along with down payment assistance up to 5 percent. Like the Home Sweet Texas Home Loan Program, the assistance can be either a grant or second mortgage.
Texas down payment assistance
While TDHCA’s and TSAHC’s programs can be paired with down payment assistance, certain cities in Texas might also have their own assistance programs, which are worth checking out if you’re buying a home in the area.
For instance, the city of Dallas offers the Dallas Homebuyer Assistance Program, which is a zero-percent deferred loan that can help with your down payment and closing costs.
Other Texas homebuyer assistance programs
Mortgage credit certificate (MCC)
A mortgage credit certificate (MCC) is a federal tax credit for a percentage of your annual mortgage interest. The credit is equal to either 20 percent or 30 percent of the interest, depending on how much you borrowed for your mortgage, up to $2,000 per year.
You can combine the MCC with a My First Texas Home loan, but you’re not required to have that type of loan in order to be eligible. It is only available to first-time homebuyers and veterans who meet income and purchase price limits.
Other first-time homebuyer loan programs
In addition to Texas state homebuying programs, you can consider any of the nationally-available first-time homebuyer loan programs, including:
- FHA loans – If you have a lower credit score or limited savings, consider an FHA loan. These loans are widely available, have a minimum credit score of 580 and require a down payment as little as 3.5 percent.
- VA loans – If you’re a member of the military or veteran, you could qualify for a VA loan, which doesn’t require a down payment.
- USDA loan – USDA loans don’t have a down payment requirement, but are only available to borrowers buying in a USDA-eligible rural area. You typically need a credit score of 640 or higher to qualify.
For other Texas homeownership programs, including by city and county, visit HUD.gov.
If you’re interested in a Texas Department of Housing and Community Affairs program, start with this calculator to determine if you qualify. From there, you can find an approved mortgage lender to help you get the process started. It’s helpful to have your documentation handy ahead of time, including three months’ worth of bank statements and two months’ worth of recent pay stubs.
If you’re considering a program through the Texas State Affordable Housing Corporation, begin by taking this eligibility quiz. You can then browse through the organization’s list of lenders to learn more about your options.
Whichever lender or loan program you decide on, be sure to compare mortgage rates and loan offers across multiple lenders. This can help you find the most affordable mortgage for your first home purchase.