Texas First-Time Home Buying Assistance Programs & Grants for 2024

Texas First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 07/2022)

    Everything about Texas is big, including the housing market. The second largest state (behind Alaska) and the second most populous (behind California) has seen enormous growth in home sales thanks to the robust Texas economy and employment opportunities.

    Home prices in the Lone Star State had increased 19.3% by May 2022 compared with May 2021, to a median sale price of $390,500, according to the real estate firm Redfin. The top 10 markets in Texas all saw home prices increase more than 40%, with prices in the No. 1 hot spot, Cedar Hill, rising almost 67%.

    Two main organizations offer mortgage and down payment assistance that may help first-time homebuyers and others.

    Who Is Considered a First-Time Homebuyer in Texas?

    Anyone who hasn’t owned a primary home in the past three years is considered a first-time homebuyer in Texas, which jibes with the federal government’s definition.

    Be aware that some benefit programs waive the first-time homeowner requirement for people purchasing a property in a qualified targeted census tract and for veterans.

    Recommended: The SoFi Guide to First-Time Home Buying

    6 Texas Programs for First-Time Homebuyers

    The Texas Department of Housing and Community Affairs (TDHCA), the state agency responsible for affordable housing, offers several homebuyer programs for both first-time and repeat buyers who meet certain income and purchase price limits.

    In addition, the Texas State Affordable Housing Corporation is a nonprofit that helps low-income homebuyers break into the Texas real estate market. To participate in the two agencies’ programs, buyers must take a homebuyer education course, which can help them understand how much mortgage they can afford, what fees are involved, and how the lending and closing processes work.

    Texas is also home to local mortgage and down payment assistance programs. Here’s a look at some specific programs.

    1. My First Texas Home

    This program for first-time buyers and military veterans from TDHCA offers a 30-year low-interest mortgage backed by the FHA, VA, or USDA. Up to 5% of the mortgage is available in an interest-free, no-payment second mortgage for down payment assistance. The loan is repaid only if you sell your home, refinance, or pay off your mortgage.

    Buyers must have a credit score of 620 or above and meet the TDHCA income and purchase price limits determined by county. (Borrowers may earn up to 115% of the area median family income or up to 140% in targeted areas of the state.)

    2. My Choice Texas Home

    Also a TDHCA program, My Choice Texas Home is available to first-time and repeat buyers. The 30-year, low-interest rate mortgages are guaranteed by the FHA, VA, and USDA. This program also offers conventional loans.

    Like My First Texas Home, buyers can receive up to 5% in an interest-free, no-payment second mortgage for down payment assistance.

    Buyers must have a credit score of 620 or above and meet the same TDHCA income limits as above.

    3. Home Sweet Texas Home Loan Program

    A good first step to see what Texas State Affordable Housing Corporation programs you might qualify for is to watch a video and take an eligibility quiz .

    This program offers first-time and repeat buyers a 30-year FHA, VA, USDA, or HFA conventional loan and includes up to 5% in down payment assistance, which can be a grant or a no-interest, no-payment second mortgage that is forgiven after three years unless you sell your home or refinance your mortgage before that.

    Borrowers need to meet income and purchase price requirements and have a credit score of at least 620.

    4. Homes for Texas Heroes

    The Texas State Affordable Housing Corporation also offers a 30-year fixed-rate mortgage for veterans and certain public service professionals such as teachers, firefighters, and corrections officers.

    Like the Home Sweet Texas Home program, up to 5% down payment assistance is available as a grant or no-interest, no-payment second mortgage forgivable in three years.

    In addition to being a veteran or public servant, borrowers must have a credit score of 620 or above and meet income and purchase price requirements.

    5. Local Mortgage and Down Payment Assistance Programs

    First-time and repeat buyers should be sure to check for local programs from various cities, counties, and financial institutions for additional assistance. Dallas, Austin, Houston, and Corpus Christi, for instance, have local and neighborhood down payment assistance programs.

    6. Mortgage Credit Certificate

    First-time borrowers, veterans, and people buying in targeted areas in Texas, including those in the My First Texas Home program, may be eligible for a Texas mortgage credit certificate. The certificate allows borrowers to take 20% to 30% of their mortgage interest paid as a federal tax credit of up to $2,000 a year. Borrowers must meet income and price limits to qualify.

    How to Apply to Texas Programs for First-Time Homebuyers

    You can find information about qualifications, applications, and requirements for loan programs at the websites for both the Texas Department of Housing and Community Affairs and the Texas State Affordable Housing Corporation .

    Neither organization lends directly, but you can find a list of their approved participating lenders on their websites. They also provide a list of recommended real estate professionals. It’s especially important for first-time buyers, who may be unfamiliar with the mortgage lending process, to compare interest rates, fees, and other costs among lenders to find the most affordable loan.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    US Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    Texas First-Time Homebuyer Stats for 2022

    Here’s a snapshot of first-time and repeat homebuyers in Texas from the Texas Realtors Homebuyers and Sellers 2022 report.

    •   32% of homebuyers in Texas are first-time buyers, compared to 34% nationally

    •   49% of first-time buyers are married couples, compared to 52% nationally

    •   19% and 16% are single females and single males, respectively, compared to 19% and 11% nationally

    •   The typical homebuyer in Texas is 47 years old, compared to 45 nationally

    •   The median household income for Texas homebuyers is $107,500, compared to $102,000 nationally

    Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Texas seems to be a land of opportunity for job growth and home-owning opportunities. Income-qualified buyers may reap mortgages paired with generous down payment assistance. Others can look for a well-fitting mortgage on their own among the vast landscape of home loans.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% to 5% for qualifying first-time homebuyers.

    View your rate


    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in Texas?

    Yes. The Texas Mortgage Credit Program allows first-time homebuyers to take 20% to 30% of their mortgage interest as an annual federal tax credit, up to $2,000, depending on the size of their mortgage.

    Is there a first-time veteran homebuyer assistance program in Texas?

    The home-buying programs provided in Texas are available to veterans who are first-time or repeat buyers.

    What credit score do I need for first-time homebuyer assistance in Texas?

    For many of the programs available in Texas, buyers need a credit score of 620 or more to qualify. But there are other private, state, local, and federal loan programs that borrowers with lower scores or no credit history may be able to access.

    What is the average age of first-time homebuyers in Texas?

    First-time buyers between the ages of 25 and 34 account for 46% of homebuyers. That’s in line with the national statistic of 51% of first-time buyers in that age range.

    Photo credit: iStock/ivanastar

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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