Texas offers first-time homebuyers a wide variety of options, ranging from down payment assistance to homebuyer education courses, that help Texans with their homeownership goals. Texans can choose programs from the Texas Department of Housing and Community Affairs (TDHCA) or the Texas State Affordable Housing Corporation (TSAHC).
On this page
- First-time homebuyer (FTHB) programs in Texas
- Texas first-time homebuyer qualifications
- Types of Texas first-time homebuyer down payment assistance
- Other first-time homebuyer loan programs
- DPA vs. standard FTHB programs
- Home price trends in Texas’ major areas
- What are the current mortgage rate trends in Texas?
First-time homebuyer (FTHB) programs in Texas
The TDHCA is a state agency responsible for Texas’ affordable housing programs and focuses the bulk of its resources on mortgage revenue bond financing used to fund down payment assistance (DPA) options for Texans under the umbrella of The Texas Homebuyer Program. The TSAHC is a nonprofit organization created by the Texas Legislature to meet the housing needs of low-income and underserved populations by providing grant and DPA programs.
My First Texas Home
The TDHCA sponsors the My First Texas Home program statewide for qualified first-time homebuyers and veterans. Available features of this program include:
- 3-year forgivable second loans
- 30-year second loans at a 0% interest rate
- Down payment and closing cost assistance of 2% to 5% of the loan amount
- Combination of down payment assistance with a mortgage credit certificate
Requirements
To be eligible for this program:
- You must be a first-time homebuyer or prove you haven’t owned a home in the past three years
- You need a 620 minimum credit score
- Your income must be within the program limits
- Your property value must meet the program limits
- You’ll need a mortgage preapproval with a Texas Homebuyer Program-approved lender
Pros and cons
| Pros | Cons |
|---|---|
Down payment assistance available up to 5% | Credit score minimum is higher than FHA 580 minimum |
Multiple second loan down payment options available | Forgivable loans may need to be repaid if the home is refinanced or sold too soon |
Mortgage credit certificate option adds extra potential tax savings | Income limits apply and only available to first-time homebuyers and veterans |
My Choice Texas Home
Repeat homebuyers who make more than the limits set by the TDHCA may be eligible for the My Choice Texas Home program. Some highlights of the program include:
- Available statewide in Texas
- No first-time homebuyer restrictions
- Down payment and closing costs assistance of 2% to 5% of your loan amount
- 30-year, 0%-interest-rate second loan option
- 3-year forgivable second loan option
- Higher income limits compared to the My First Texas Home program
Requirements
To qualify for the My Choice Texas Home loan program:
- You must meet income limits
- The home you buy must meet property value limits
- Your credit score must be at least 620
- Your loan must be provided by one of The Texas Homebuyer Program approved lenders
Pros and cons
| Pros | Cons |
|---|---|
Higher income limits than the My First Texas Home limit | Credit score requirement is higher than FHA 580 minimum |
Down payment and closing costs assistance up to 5% of your loan amount | May need to repay assistance if the home is refinanced or sold too soon |
Forgivable and 0%-interest-rate second loan options available | Can only use lenders approved by The Texas Homebuyer Program |
Texas Mortgage Credit Certificate
Qualified Texas homebuyers may receive a dollar-for-dollar reduction in their federal tax liability if they’re eligible for the Texas Mortgage Credit Certificate (MCC) Program offered through the TDHCA. First-time homebuyers and veterans can combine the certificate with the My First Texas Home program, or add it to a standard mortgage program.
Some important things to know about the program:
- No minimum credit score requirement if the certificate is used with a standard loan program
- Must not exceed income and purchase price limits
- Limited funds so homebuyers are encouraged to apply early in the year
Requirements
To qualify for the Texas Mortgage Credit Certificate:
- You must be a first-time homebuyer or veteran, or able to prove you haven’t owned a home in the past three years
- You must meet the the income and purchase price limits for your area
- You must complete a homebuyer education course
- You must own the home at least nine years to avoid paying a portion of the credit back
Pros and cons
| Pros | Cons |
|---|---|
May reduce your federal tax liability dollar for dollar | May require you to pay a portion back if you sell your home within nine years |
May qualify for a larger mortgage since your take-home pay is effectively higher | Must meet income and price limits set by the program in your area |
No minimum credit score if combined with a regular mortgage program | Funds only available for a limited time |
Home Sweet Texas
The Home Sweet Texas program is offered through the TSAHC. You must choose a lender approved for the TSAHC DPA programs, and verify your eligibility online before you can apply.
Requirements
The requirements are slightly different depending on whether you’re applying for down payment assistance or just a mortgage credit certificate.
To qualify for DPA or the MCC/DPA combination program you’ll need:
- A minimum 620 FICO score if you choose a VA, FHA or USDA first mortgage
- A minimum 640 FICO score for a conventional first mortgage with a forgivable second loan
- Income within the limits set by the MCC or DPA program you’re applying for
- An approval from an approved TSAHC lender
- Completion of a homebuyer education course by at least one of the borrowers
Pros and cons
| Pros | Cons |
|---|---|
Choice of assistance equal to 3% to 5% of the loan amount | Sale of home within three years may result in partial repayment of the DPA grant funds |
Grants don’t have to repaid once six months after your closing date have passed | No first mortgage or forgivable second mortgage options for scores below 620 |
Mortgage credit certificates can be combined with DPA programs to reduce federal income tax liability | Some programs may require partial repayment of the DPA assistance if the home is sold within nine years |
Homes for Texas Heroes
The Home for Texas Heroes program is another TSAHC program designed to provide DPA and home loans with the same basic qualifying requirements as the Home Sweet Texas program. However, borrowers must be in an approved profession.
Requirements
The program is available to qualified homebuyers in the following professions:
- Professional educators (public school teachers, aides, librarians, counselors and nurses)
- Police officers
- Public security officers
- Firefighters
- EMS personnel
- Veterans and active-duty military personnel
- Corrections officers
- Nursing faculty
One additional bonus exclusive to this program: If you apply for the Texas Heroes DPA plus an MCC, you won’t be charged the $500 MCC fee.
TSAHC mortgage credit certificates
The MCC programs offered through the TSAHC work the same as the THDCA MCCs. However, the mortgage credit certificate can’t be used with a Bond DPA, which is a special type of loan funded by the state or a local municipality. Ask your loan officer if you aren’t sure about your MCC eligibility.
Texas first-time homebuyer qualifications
You’ll need to take a few extra steps to find out if you’re even eligible for a Texas first-time homebuyer loan.
1. Decide how long you plan to stay in this home. Down payment assistance can get downright costly if you only plan to own the home for a short time. The Texas DPA programs we researched usually require you to repay a portion of the DPA if you sell your home within three to nine years of buying it.
THINGS TO KNOW ABOUT OCCUPANCY: First-time homebuyer programs are created to promote homeownership, and lenders expect that you’ll live in the home. If they learn you aren’t, they could request repayment of any assistance funds you received.
2. Make sure you meet the income and property requirements. First-time homebuyer programs are meant to help borrowers with lower income become homeowners. You can take an online eligibility quiz to find out if you meet the guidelines for TSAHC, or contact a loan officer from a local bank or mortgage company that offers the program.
3. Get a mortgage approval from an approved lender. You’ll find a list of lenders approved to offer both TSAHC and TDHCA programs. The only exception is if you’re adding a Texas Mortgage Credit Certificate and don’t need down payment assistance.
4. Take your homebuyer education course. You’ll need to complete a homebuyer education course to be eligible for TSAHC and the TDHCA first-time homebuyer programs.
5. Shop for approved lenders within the program. Not all lenders are approved to offer DPA programs, so be sure to only contact the ones listed on the TSAHC and TDHCA websites.
THINGS TO KNOW ABOUT DPA FUNDS: Call the housing agencies to find out whether DPA funds are still available. There’s usually a set budget that can run out if there is a lot of demand for the program. Once all of the funds are reserved, you’ll have to wait until it’s funded again to apply.
Types of Texas first-time homebuyer down payment assistance
First time homebuyer assistance may come in the form of a forgivable second mortgage, grant, first mortgage or second mortgage. Texas first-time homebuyer programs allow you to combine these options to fit your home financing needs.
Forgivable second mortgage
Most DPA programs offer a “forgivable second mortgage” option, which means you don’t have to pay the balance back. The catch: You have to stay in the home for a time period set by the DPA program or you’ll have to repay the entire assistance amount.
The TSAHC and TDHCA loans offer forgivable second mortgage options that don’t have to be paid back after three years. It’s considered a second mortgage because a lien is recorded on your home and not released until the three-year period has passed.
Some standard features of forgivable second liens include:
- 0% interest and no payments due during the three-year period
- Forgiveness of the balance after three years have passed
- Assistance of 3% to 5%, which can only be used toward the down payment and closing costs
- The ability to combine it with all standard loan types
Grant
A grant is assistance that doesn’t have to be repaid after a program-designated time period. For example, the DPA grant associated with TSAHC programs doesn’t have to be repaid after six months have passed since the mortgage closing. Highlights of the program include:
- Three assistance levels equal to 3% to 5% of the total loan amount
- Restrictions on use with government loan types (FHA, VA or USDA); conventional loan options don’t usually allow grants
Note: The TDHCA doesn’t offer a DPA grant program.
Mortgage credit certificate
Both the TDHCA and TSAHC offer mortgage credit certificate options, which allow you to claim a dollar-for-dollar tax credit for a percentage of mortgage interest paid each year. Unlike a mortgage interest tax deduction, the credit is actually subtracted from your federal income tax bill.
Lenders can treat the credit like extra income, which may help you qualify for a higher loan amount. There are strings attached, however: You need to own the home for a set time period (up to nine years in Texas) to avoid repaying the tax credit.
THINGS YOU SHOULD KNOW
What is a recapture tax? The mortgage credit certificate requires you stay in your home for a specific time period determined by the MCC program you choose. If you sell your home before that time period, you may owe a “recapture tax” to repay some of the tax benefit.
How much of a down payment do I need to buy a house in Texas?
You’ll need up to 3.5% of the loan amount, depending on what type of loan you qualify for. Here’s a brief overview of the down payment minimums for the available standard loan programs:
| Loan program | Down payment requirement |
|---|---|
| Conventional loan | 3% |
| FHA loan | 3.5% |
| VA loan | 0% |
| USDA loan | 0% |
Can I qualify for down payment assistance in Texas?
You may qualify for Texas down payment assistance if:
- You meet the income requirements
- You qualify for a first mortgage with an approved program lender
- You complete the required homebuyer education course
- You purchase a home that meets the program guidelines
- You plan to live in the home as your primary residence
How do I apply for Texas first-time homebuyer down payment assistance?
To qualify for TSAHC-offered DPA programs, start by filling out the eligibility quiz for the assistance you’re interested in. Then, follow the instructions for contacting a lender to discuss your homebuying plans and financial situation.
To qualify for TDHCA programs, shop for loan officers on the TDHCA-approved lender list and ask them about their experience with first-time homebuyer programs. Once you’ve chosen a company, you’ll need to be prequalified for each program you want to apply for.
Other first-time homebuyer loan programs
Conventional loans
Conventional first-time homebuyer programs include the Fannie Mae HomeReady® and Freddie Mac Home Possible® loans, which only require a 3% down payment. Like the DPA programs, income limits apply and you’ll need to complete a homebuyer education course to qualify.
FHA loans
Loans backed by the Federal Housing Administration (FHA) allow for down payments as low as 3.5% with a 580 credit score. With a 10% down payment, homebuyers may qualify with a minimum 500 score. FHA loans are often chosen by borrowers with credit scores below the DPA minimums who can come up with at least the 3.5% down payment minimum.
VA loans
Military borrowers may be eligible for no-down-payment financing with loans guaranteed by the U.S. Department of Veterans Affairs (VA). No credit score minimum applies, although some lenders set theirs at 620.
USDA loans
Low- to moderate-income homebuyers looking for homes in rural parts of the country may want to check out loans backed by the U.S. Department of Agriculture (USDA). No down payment is typically required.
Pros and cons of DPA vs. standard FTHB programs
| Pros of DPA programs | Cons of DPA programs | Pros of standard FTHB programs | Cons of standard FTHB programs |
|---|---|---|---|
Your down payment may be covered by the DPA funds | You may need to repay the funds if you sell your home too soon | You can sell your home whenever you want with no penalty | You'll need to come up with a down payment |
Your closing costs may be covered by DPA funds | You need higher credit score minimums than standard programs | You can qualify with lower credit scores than DPA programs | You'll need to pay closing costs |
Your DPA funds are forgiven, which means someone else helps you build equity in your home | You’ll pay higher first mortgage rates than standard loan programs | You can shop for the best mortgage lenders for your purchase | You'll have to pay back any money you borrow, and build equity on your own |
What are the best first-time homebuyer loans?
The table below provides some suggestions for the best first-time homebuyer loans depending on your financial situation. One note: You don’t have to be a first-time homebuyer to qualify for FHA, VA or USDA loans, but you will have to live in the home you purchase for at least a year.
| First-time homebuyer loan | Recommended for: |
|---|---|
| Conventional loan | First-time homebuyers with good credit scores and at least a 3% down payment |
| FHA loans | Homebuyers with poor credit scores who don’t qualify for down payment assistance |
| VA loans | Military borrowers who are eligible for VA financing and don’t want want to make a down payment |
| USDA loans | Homebuyers with low incomes looking for homes in rural areas approved for USDA financing |
Home price trends in Texas’ major areas
The median home price for homes in Texas has been falling since it peaked in May 2022 at $349,900. The table below shows price drops ranging from 1% to 3% in three major Texas areas from November to December 2022.
| Area | November median home price | December median home price |
|---|---|---|
| Austin-Round Rock | $477,000 | $463,900 |
| Dallas-Fort Worth | $399,100 | $387,100 |
| Houston-The Woodlands-Sugar Land | $333,500 | $328,700 |
Is there a first-time homebuyer tax credit in Texas?
Yes, if first-time buyers qualify for the mortgage credit certificate programs offered through the TSAHC and the TDHCA. These programs provide a dollar-for-dollar tax credit of up to 20% of the mortgage interest paid in a calendar year.
What that means for your paycheck:
- You can reduce your withholding to take home more pay, since your federal tax liability is reduced
- You may be owed a larger tax refund each year if you don’t make adjustments to your federal tax withholding
Always consult with a tax expert to discuss the tax benefits of homeownership, independent of applying for an MCC.
What are the current mortgage rate trends in Texas?
Like mortgage rate trends for the rest of the country, Texas home loan rates have been on the rise due to inflation and ongoing supply chain issues that started during the pandemic. There is a silver lining: The 2024 mortgage interest rate forecast is for rates to drop.
