First-Time Home Buyer Loans In Texas: Programs And Requirements

Buying a home for the first time is very exciting. It is often one of the biggest financial decisions that a person or family will make in their lives. No matter where you want to live, it is important to assess your options for home loans to determine the best way forward for your situation. Understanding the available programs and their requirements will help you to see where you might fit into the home lending process.

Many first-time home buyers in Texas have access to down payment and closing cost assistance as well as other special loan programs. Follow along to learn more about Texas first-time home buyer programs and how they may apply to you.

Are There First-Time Home Buyer Programs In Texas?

First-time home buyers looking to purchase a home in Texas can apply for programs through two organizations: the Texas Department of Housing and Community Affairs (TDHCA) and the Texas State Affordable Housing Corporation (TSAHC).

TDHCA tends to focus their lending on lower income families in more urban areas compared to TSAHC. But, these are both great programs and first-time home buyers should definitely look into both to see what they might qualify for and which might be better for their circumstances.

Each of these programs offers discounted rates, closing cost or down payment assistance, or access to loans for people with lower credit scores. Take time to sit down and write out your situation - the down payment you have saved up, your credit score, and the monthly payment that you are comfortable with. Compare this information with the offerings of each loan program to determine which program works best for you.

The following are some of the first time home buyer assistance programs available to home buyers in the state of Texas and what each of the programs offer.

Texas First-Time Home Buyer Programs

The most popular first-time home buyer programs (including closing cost and down payment assistance) available statewide in Texas include:

• My First Texas Home (TDHCA)
• My Choice Texas Home (TDHCA)
• Home Sweet Texas (TSAHC)
• Home for Texas Heroes (TSAHC)
• Texas Bootstrap Loans
• Texas Mortgage Credit Certificate (TDHCA)

My First Texas Home

The TDHCA My First Texas Home program provides closing cost and down payment assistance for first time home borrowers buying their first home in Texas. This assistance is limited to 5% of the loan and can only be used on 30-year mortgages.

This program provides its benefits in the form of a zero-interest loan that must be repaid in full if the mortgage is refinanced or paid off. This could be a good option if a first-time homebuyer does not have much cash saved for a down payment and plans to stay in the home for a long time.

My Choice Texas Home

The TDHCA My Choice Texas Home program is a similar closing cost and down payment assistance program to My First Texas Home. It is also limited to 5% of the loan and can only be used on 30-year mortgages.

However, this loan is not limited to just first-time home buyers. Many home buyers with a credit score of at least 620 could qualify. This is a great option for any house hunter who does not have a lot of cash saved for a down payment, but still has a decent credit score.

Home Sweet Texas

The TSAHC Home Sweet Texas program is a fixed-rate mortgage program for buyers with low and moderate incomes in Texas. The limits vary by county, limit charts are listed here. This eligibility quiz will help you to determine if you qualify.

To qualify, you must have a qualifying profession, have not owned a home in the previous three years, have a gross income under $106,625, and be buying a home in a qualifying area. These are a lot of stipulations, but if you meet these criteria, this could be a great option for your home loan.

Home For Texas Heroes

The TSAHC Homes for Texas Heroes program is for teachers, firefighters, EMS personnel, police officers, correctional officers, and veterans. The program provides a fixed-rate mortgage assuming the buyer is in the qualifying profession, stays under a set income threshold, and has a credit score of at least 620. This is a great option for those who can meet the eligibility criteria.

Texas Bootstrap Loan

The Texas Bootstrap Loan program is designed to assist owner-builders build their own homes. To qualify, the owner must do at least 65% of the labor toward building or rehabilitating the home themselves. This 0% interest, 30-year loan is limited to $45,000 and is only available to home owner-builders with incomes lower than 60% of the local median family income.

This option is best for people who are comfortable with a major building project and have experience building homes. You will also have to have a lot of time on your hands to build the house and be able to document your processes to qualify.

Texas Mortgage Credit Certificate

The TDHCA Mortgage Credit Certificate (MCC) is a program that allows homeowners to get a federal tax credit for up to 40% of their annual mortgage interest payments, with a maximum of $2,000 credit per year. This program is open to first time homeowners or homeowners who have not owned a home in the prior 3 years. This is a great benefit once you buy the home and should be something you discuss with your CPA to see if you qualify for.

Requirements For First-Time Home Buyers In Texas

Each first-time home buyer assistance program has different requirements that need to be fully researched to make sure you qualify before taking the time to apply. However, most of these programs require at least a 620 credit score, require the use of a 30-year mortgage, only apply to primary residences, and have an income limit of some sort. Some of the programs have geographical limits as well, or the income limits fluctuate depending on location.

Nationwide First-Time Home Buyer Loans

There are also several nationwide first-time home buyer loans that would apply to home buyers in Texas:

• FHA loans
• VA loans
• USDA loans

FHA loans

FHA loans are a federal program that allow home buyers to secure a mortgage with only 3.5% down payment, assuming they have a credit score of 580 or higher. This loan can be for the entire value of a home and FHA loans can be made for people with slightly lower credit scores with a higher down payment. This is a great option for home buyers without a lot of savings for a down payment.

VA loans

VA loans are available to members of the military and their family members. VA loans are for the full value of a home – no down payment necessary. Even if there is no down payment, there is often a VA funding fee which is between 1.25% and 2.5% of the loan value.

VA loans also have some of the lowest closing costs of any loan. This is a great option for members of the military without a lot of savings for a down payment who may be moving around or just starting out in a permanent location.

USDA loans

USDA loans were created to help encourage home buyers to move to rural areas. These loans can cover 100% of the home’s value – meaning no down payment necessary. However, they are very limited. The home must be in a designated rural area and the household income cannot exceed 115% of the median income in the area where the home is located.

This loan is a great option if you have a low to medium income and want to buy a home in a rural area. If you’re able to work remotely and are looking to move out of the city, this could be an option for you.

The Bottom Line

There are many first-time home buyer programs in the state of Texas, as well as federal programs that can apply within the state. It is important to determine how much home you want to buy, where you want to buy a home, how much of a down payment you have saved, and your credit score to determine which programs you might qualify for.

If you are ready to move forward buying a home, start your mortgage application today.