2024 Texas First-Time Homebuyer Programs and Loans

There are several first-time homebuyer programs in Texas, including down payment assistance, tax credits and low-interest mortgages, to help Texans navigate the rising costs of purchasing their first home. To qualify, you generally need a credit score of 620 or better, and income restrictions may apply.

First-time homebuyer programs in Texas

Texas has a competitive housing market due to its continued population growth. According to the U.S. Census Bureau, Texas was the fourth fastest-growing state, surpassed only by Nevada, Utah and Idaho.

To help first-time homebuyers successfully secure a home loan despite all the competition, Texas offers several programs to assist first-timers in affording a home of their own:

• Home Sweet Texas Home Loan Program
• My Choice Texas Home
• My First Texas Home
• Texas Bootstrap Loan Program
• Texas Mortgage Credit Certificate

Home Sweet Texas Home Loan Program

The Homes Sweet Texas Home Loans Program provides home loans and down payment assistance to low- and middle-income families.

Through the program, qualifying families can qualify for a low-interest mortgage loan and receive funding to use toward the down payment. You can opt to receive the down payment assistance either as a grant — which doesn’t have to be repaid — or as a deferred forgivable second lien loan that only has to be repaid if you refinance or sell within three years of the home’s purchase date.

If you qualify as a first-time homebuyer, this program can be combined with the mortgage credit certificate, too.

Requirements

• A credit score of 620 or higher
• Your income cannot exceed 80% of the area median family income for the potential home’s location
• You must complete a homebuyer education course
• Must be able to qualify for a FHA loan, VA loan or USDA mortgage

Pros and cons

My Choice Texas Home

My Choice Texas Home is a program available to new and repeat homebuyers. Through the program, you can qualify for a 30-year, low-interest mortgage with up to 5% of down payment and closing cost assistance. It’s available statewide and it doesn’t have a purchase price limit.

Requirements

• You must have a credit score of 620 or higher
• You must complete a homebuyer education course
• You must occupy the home as a principal residence within 60 days of mortgage closing

Pros and cons

My First Texas Home

My First Texas Home is a program designed solely for military veterans and first-time homebuyers. With this program, qualifying participants can take out a 30-year, low-rate mortgage with up to 5% of the first mortgage amount to use toward the down payment and closing costs. This program can be combined with the mortgage credit certificate program.

Requirements

• You must have a credit score of 620 or higher
• You must meet income and property value limits for your selected county
• You must be a first-time homebuyer or military veteran

Pros and cons

Texas Bootstrap Loan Program

Not limited to first-time homebuyers, the Texas Bootstrap Loan Program helps low-income Texans purchase property to build or repair a home. Participants will receive up to $45,000 as a loan, and it’s repaid over a term of 30 years at 0% interest. In exchange, participants contribute at least 65% of the labor themselves.

Requirements

• Your income cannot exceed either 80% of the area median family or state income
• You must provide at least 65% of the labor, and you must work with a certified administrator
• You must live in the state for at least six months before applying

Pros and cons

Texas Mortgage Credit Certificate

With the Texas mortgage credit certificate (MCC) program, you can receive a tax credit that reduces your income tax obligation. It’s an annual credit that allows you to get up to 20% of the mortgage interest you paid back as a tax credit.

Previously, the MCC was a standalone program. However, it now can only be utilized by qualifying participants of the Home for Texas Heroes program for first responders or the Home Sweet Home Texas Home Loan Program.

Requirements

• You meet the income limits for your county
• You must be a first-time homebuyer (you have not owned a home within the past three years)
• You intend to use the home as your principal residence
• You take out a conventional, FHA, VA or USDA mortgage

Pros and cons

Texas first-time homebuyer qualifications

Texas has several homebuyer programs, and their eligibility requirements vary by program. In general, you need to fall into the low-to-moderate-income category and have a credit score of at least 620. According to Experian, the average credit score of Texas was 695 as of 2023, so many residents can qualify.

Steps to apply for a first-time homebuyer program

The process to find out whether you’re eligible is easy, and the state has a website to guide you through the process. Follow these steps to apply for a Texas first-time homebuyer program:

1. Take an eligibility quiz. The Texas State Affordable Housing Corporation (TSAHC) website has an eligibility quiz you can use to find out what programs you may be eligible for. The program will ask about your job, whether you’re a first-time homebuyer, your household size and your household income. Based on this information, the site will tell you what programs are available to you.
2. Find a lender. To take advantage of the Texas programs, you must work with a loan officer employed by an approved mortgage company. You can find a qualifying loan officer through the TSAHC website.
3. Complete a homebuyer education class. Texas first-time homebuyer programs have a homebuyer education requirement, and the course must be approved by the TSAHC. In-person classes range in cost from $0 to $50, while online classes range from $35 to $99.
4. Find a Realtor. Now you’re ready to find a Realtor and start shopping for a home. You can use any Realtor you’d like; you aren’t limited to a TSAHC-recommended Realtor.

Understanding Texas first-time homebuyer down payment assistance

Texas operates several homebuyer programs to help low- to moderate-income families become homeowners. Depending on your profession, income and whether you’ve bought a home before, you may qualify for a deferred second mortgage, grants or mortgage credit certificates.

Deferred second mortgage

A deferred second mortgage can be used to cover the down payment and closing costs. It’s not repayable over a specific period, but rather the mortgage only has to be repaid when you sell or refinance your home.

Forgivable second mortgage

A forgivable second mortgage can be used for closing costs and down payments. And if you stay within the home for a certain length of time, it may be forgiven. For example, the Home Sweet Texas Home Loan Program allows you to receive a deferred forgivable second lien. The loan only has to be repaid if you sell or refinance your home within three years of its purchase date.

Grant

Some assistance comes in the form of grants that don’t have to be repaid. The Home Sweet Texas Home Loan Program includes a grant option for down payment assistance; participants can receive up to 5% of the loan amount for the down payment and closing costs

Mortgage credit certificate

A mortgage credit certificate is a tax credit that lowers your tax liability. In Texas, qualifying homeowners can get an annual tax credit of up to 20% of the mortgage interest paid.

Keep these things in mind about DPA programs

Down payment assistance programs can make homeownership more attainable, but there are plenty of details, even restrictions to keep in mind. For example, while some programs offer grant funding that doesn’t have to be repaid, some may be deferred payment loans that need to be repaid if you sell your home or refinance your mortgage. Each program also tends to come with purchase-price and income limits.

How much of a down payment do I need to buy a house in Texas?

In Texas, the average down payment for first-time homebuyers was $30,558. But depending on the house you buy, you can save less and still qualify for conventional, FHA, VA and USDA loans thanks to their low-down-payment requirements and the Texas down payment assistance programs.

Can I qualify for down payment assistance in Texas?

To qualify for down payment assistance in Texas, you typically need to meet the following requirements:

→ You must live in the state

→ You must be purchasing a primary residence

→ You must have a credit score of 620 or higher

→ You must meet area income limits

How do I apply for Texas first-time homebuyer down payment assistance?

To start the process, take the eligibility quiz on the TSAHC website. Based on your profession, income and location, it will tell you what homebuyer assistance programs you may be eligible for and how to apply.

  Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

Conventional loans

A conventional loan is not backed by a government agency and is available from banks and credit unions. With good credit, you may qualify for a mortgage with competitive rates and a down payment as low as 3%.

FHA loans

FHA loans are not just for first-time homebuyers, but they can make homeownership more accessible for some. You can qualify for a loan with a down payment of just 3.5% if your credit score is 580 or higher. FHA mortgage rates vary by lender.

VA loans

VA loans are available to active service members, military veterans and surviving spouses and do not require a down payment. VA loan mortgage rates vary by lender.

USDA loans

USDA loans are available to homebuyers looking to buy rural properties in designated areas. Like VA loans, USDA loans allow you to buy a home with 0% down.

What are the best first-time homebuyer loans?

First-time homebuyer programs make homeownership more attainable with low down payment and credit score requirements. Conventional and FHA loans allow you to buy a home with a down payment under 3.5%, and FHA loans have low credit score minimums.

Other loans, like USDA and VA loans, allow you to buy a home without a down payment, but their eligibility requirements are more restrictive.

Home price trends in Texas’ major areas

Home prices in Texas have steadily increased. Within certain metropolitan areas, the price changes have been dramatic:

→ Austin-Round Rock-Georgetown: The Austin-Road Rock-Georgetown area saw a decrease of 3.25% over the past year. But looking at the past five years, home prices increased by nearly 60%.

→ El Paso: In the last year, home prices are up 6.86%, and over five years, home prices increased by over 66%.

→ Dallas-Plano-Irving: Dallas-Plano-Irving has continued to experience price increases. Over the past year, its home prices increased by 3.49%, and its prices increased by 57.10% over the past five years.

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

Although there used to be a federal tax credit for first-time homebuyers, that credit was discontinued. However, first-time homebuyers in Texas may be eligible for the mortgage credit certificate, which is an annual benefit that gives you a credit of up to 20% of the mortgage interest paid — a significant tax break for homeowners.

What are the current mortgage rate trends in Texas?

In Texas, both the 30-year fixed and the 5/1 ARM are very close to where they started the year at, while the 15-year fixed-rate in Texas is up almost a half of a percentage point in the last three months. Mortgage rates in Texas tend to be slightly lower than the national average.