Purchasing and owning a home is the dream of hundreds of thousands of Texans on a yearly basis, but too often many of those same people shy away from buying because of barriers perceived to be standing in their way.
Rather than focusing on the freeing feelings that homeownership provides– the grassy yard for the kids and dog to play in and the picturesque picket fence surrounding the property – many Texans get tripped up by the potential financial issues involved in making such a life-altering purchase.
Must I have the 20% down payment saved before I can even consider purchasing my own home? Where will I ever come up with the thousands of dollars needed for closing costs? Is there any help available to assist me with these financial concerns?
While those are certainly good questions to ponder before setting out on the house-hunting process, you should know that there are plenty of state, county and city programs already in place to make the daunting prospect of buying a home significantly easier for you and your family.
There are special programs in place for Texans who are first-time homebuyers and eager purchasers who haven’t owned a home in more than three years. There are specific programs in place for veterans, firefighters, police officers and other heroes who put the well-being of others ahead of their own. There are even special assistance programs in place for citizens with low-to-very-low incomes. Almost anyone in Texas can become a homeowner if they can clear a few financial barriers and qualify under their lender’s terms.
The best part of all is that the programs in place will help you tremendously with covering down payment and closing costs. Several plans offer low-interest and no-interest loans to defray the costs, while other programs give homebuyers grants that don’t have to be repaid or second liens that eventually will be forgiven.
There are plans for everyone in Texas dreaming of someday buying their own home. So, go ahead and start worrying about what color to paint the bedrooms and what size lawn mower you will need to trim the grass.
Read on to find out about all the plans in place that can assist you in making homeownership and easier proposition than you likely first thought.
Down Payment Assistance Programs in Texas
Often, the amount of a down payment and/or closing costs are the biggest hurdles to families believing they can afford to purchase a home.
However, there are down payment assistance programs all over Texas that can ease some of the burden. Often, these down payment assistance programs are similar to second mortgages on the home, or they can come in the form of interest-free grants or forgivable second liens.
These down payment assistance programs are offered by state, regional and city housing authorities, lenders and nonprofit housing organizations. The amounts of the loans can vary widely depending on which part of The Lone Star State that you want to live. Some of the perks offered in these assistance programs — which can be used for down payments, closing costs or principal reductions — are deferred payments or 0% percent interest rates on loans. A grant is an interest-free loan that occasionally must be re-paid later, while other loans are usually only repaid when the primary mortgage is paid off and the home is sold.
To recap, down payment assistance programs are extremely useful tools for citizens to use to become homeowners. These assistance plans, which usually average out to be several thousands of dollars in Texas, can provide you with the funding necessary to cover the down payment and/or closing costs — the two hurdles most often cited when it comes to preventing families from owning their own homes.
Texas Department of Housing and Community Affairs (TDHCA) Programs
The Texas Department of Housing and Community Affairs, which was created in September of 1991, is the state agency that makes affordable housing available to aspiring homeowners in The Lone Star State. The TDHCA also monitors and regulates the state’s manufactured housing industry.
The TDHCA controls $2 billion to make community-based opportunities available to Texans in need of assistance with purchasing their own homes. The TDHCA uses for-profit, nonprofit and local government partners to run its programs.
The TDHCA’s goal is act as a conduit for federal grant money and housing services. Also, the TDHCA acts as Texas’ state housing finance agency since most major housing programs require the participation of private investors and private lenders.
The TDHCA is in place to help eligible Texans, who qualify based on their income levels, find affordable housing opportunities. It also offers educational materials and technical assistance as it relates to housing matters in the Lone Star State.
My First Texas Home
The “My First Texas Home” program, sponsored by the Great State of Texas, is available statewide, but only to first-time homebuyers and veterans. This 30-year, 0% interest rate mortgage comes with up to 5% of the first lien mortgage amount, which can be used by the purchaser for down payment and closing cost assistance.
The flexible down payment plans are as low as 2%, 3%, 4% and 5% and offer closing-cost assistance to make the prospects of owning a home easier for buyers. Although it’s technically a loan, the money for the down payment and/or closing costs doesn’t need to be repaid, sold or re-financed.
- Eligibility – As mentioned previously, you must be a veteran, a first-time homebuyer or someone who hasn’t owned a home in the last three years to be eligible. This program can be combined with the “Texas Mortgage Credit Certificate” program, which allows you to maximize your benefits with a dollar-for-dollar reduction on the federal tax liability for as long as you owe on the mortgage loan and live in the home.
- Income Limits — There are limits in place as to how much money you can make and still be eligible for this program. Income limits are set at up to 115% of the Area Median Family Income value (AMFI) and the amounts vary based on the county where the home is purchased.
- Purchase Price Limits — Purchase price limits work in concert with the income limit qualifications in the “My First Texas Home” program. Check with your local agent to determine the purchase price limit based on the area in Texas where you are buying your home.
- Credit Score Requirements — The minimum credit score to apply for Texas’ down payment assistance program is 620. If your credit score falls below the required 620, an FHA loan might be better for you. Under the terms of FHA loans, potential buyers with a credit score of 580 or higher must put down at least 5% of the loan and purchase mortgage insurance that will be paid throughout the loan.
- Homebuyer education — The Texas Department of Housing and Community Affairs requires a homebuyer education program. The two-hour course will walk you through the three important phases of the home-buying process: preparing for homeownership, financing your home and finally, purchasing your home.
My Choice Texas Home
The “My Choice Texas Home” plan provides home loans, down payment assistance and closing cost assistance for Texas homebuyers of all professions.
The program is available through the Texas Department of Housing and Community Affairs. If you are dreaming of becoming a homeowner in Texas but aren’t able to raise enough money to cover the substantial down payment that most homes require, My Choice Texas Home could be the right plan to give you the help that you need.
- Eligibility — The plan is far more accessible to all homebuyers because you do not need to be a first-time homebuyer and there is no employment qualification. It offers a 30-year fixed interest rate mortgage loan with down payment and closing cost assistance up to 5% of the loan amount. This program is available statewide through a network of participating lenders. Homebuyers can choose government-backed loans (FHA, VA or USDA) or a conventional loan.
- Income Limit — This program has a sliding scale based on the lender and the number of incomes in the household. The minimum requirement for income is 30% of the median income in the area, 30% of those with low income and 30% of those with very low-income levels.
- Purchase Price Limit — These limits are different in targeted and non-targeted areas designated by the state government. Prospective homebuyers will have to meet the Area Median Family Income (AMFI) amounts depending on what area of Texas that their home sits.
- Credit Score Requirements — You can qualify for this plan when a bank examines your credit score and your current debts against your income. If you meet the credit score requirement of 620, a mortgage will almost assuredly be issued for the total amount borrowed.
- Homebuyer education — The Texas Statewide Homebuyer Education Program (TSHEP), is a requirement in this plan. It is designed to work with local nonprofit organizations to teach pre- and post-purchase principles and applications. Only one person on the loan must complete the educational course. The 6-8 hour program can be taken online at a cost of $75.
Texas State Affordable Housing Corporation (TSAHC) Programs
The TSAHC was created in 1994 and it is set up to help low—to-moderate income Texas families find options for home ownership in underserved sections where affordable housing is not available.
This plan offers fixed-rate mortgage loans, down payment assistance and mortgage interest tax credits for prospective homebuyers. The TSAHC also offers assistance of 5% of the loan so new homebuyers can cover the cost of the down payment and any closing costs. Also, if you are a first-time homebuyer, you can receive a tax credit known as a Mortgage Credit Certificate (MCC) that can save you up to $2,000 every year on your income taxes. TSAHC works with reputable lenders from all over Texas to give prospective buyers plenty of options.
Homes for Texas Heroes Program
This program provides homebuyer assistance specifically for teachers, police officers, corrections officers, veterans and firefighters and EMS personnel.
The benefits of this program are a 30-year fixed interest rate mortgage loan with several different rates and loan options. Down payment assistance is provided as a forgivable second lien loan or a grant, meaning it never needs to be repaid. The available amount of down payment assistance — funds that can be used for the down payment and/or closing costs — is 5% of the original loan amount.
- Eligibility — You do not have to be a first-time homebuyer to be eligible for this program. This plan is available statewide through a network of participating lenders. The TSAHC does not require borrowers to use an approved realtor, however many realtors are very familiar with this plan and can provide helpful resources. Those Texans who use this plan and are first-time buyers can also apply for a Mortgage Credit Certificate. Those eligible homebuyers are allowed to combine use of the Down Payment Assistance and Mortgage Credit Certificate programs to maximize the financial assistance.
- Income Limit — The limits were set by the U.S. Housing and Urban Development. To be eligible for this plan, households must earn at or below 80% of the area median income, have good prior rental history and meet other basic eligibility requirements set by the lender. For example, the minimum single-family income in Austin is $54,720, while the minimum in San Antonio is much lower at $40,320.
- Purchase Price Limit — Expanded purchase price limits are available in Texas’ targeted areas where the citizens are under-served and affordable housing is scarce. Targeted areas are identified by the IRS as “qualified census tracts” or “areas of chronic economic distress.” These areas almost always allow potential homebuyers to still qualify for the program even if they make more income or want to buy a home with a higher purchase price. Houston’s Harris County has the state’s largest number of targeted areas.
- Credit Score Requirements — All loans in this program require FICO scores greater than or equal to 640 for all borrowers on the application.
- Homebuyer education — All homebuyers must complete a pre-purchase homebuyer education course in this program. The education requirement may be met by attending one-on-one counseling as provided through the network of certified Texas Statewide Homebuyer Education Providers, HUD-approved counseling agencies, on-line counseling offered through mortgage insurance companies and/or HUD, Fannie Mae, or Freddie Mac. The certificate of completion must be included in the participating lender’s loan purchase file and compliance file in order to satisfy this requirement.
Home Sweet Texas Home Loan Program
This program is available for Texas homebuyers with low-to-moderately-low incomes. There are several different loan options on this 30-year fixed interest rate mortgage loan. Down Payment Assistance (DPA) is provided in the form of a forgivable second lien loan or a grant, meaning it never needs to be repaid. The DPA is available for up to 5% of the total loan amount.
- Eligibility — One of the key factors in differentiating this loan program from others is that you don’t have to be a first-time homebuyer to be eligible. Also, the program is available statewide through a network of participating lenders. Whereas the TSAHC does not require borrowers to use an approved realtor, the Home Sweet Texas Home Loan program can provide resources in helping you find a realtor who is familiar with the program’s rules and regulations. First-time homebuyers using this plan also can apply for a Mortgage Credit Certificate to maximize their potential savings.
- Income Limit — In this program, the income limits vary by county in Texas. There are expanded income and purchase price limits available when purchasing a home in targeted areas of Texas. Typically, you must have a gross household income of less than $97,000 to qualify for this loan program, but that amount has been expanded in certain Texas counties.
- Purchase Price Limit — Again, the purchase price limits are much more forgiving when buying a home in a targeted area of Texas as opposed to buying in an area without that designation. For example, in the Houston-Sugar Land-The Woodlands areas (Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller Counties), prospective homebuyers can spend up to $360,067 on a house in the targeted areas as opposed to just $294,600 in non-targeted areas.
- Credit Score requirement — If you have a credit score of 680 or higher, this program allows you to receive down payment assistance as a second lien loan at 0% interest and no monthly payments. This loan is repayable on sale, transfer or refinance of your mortgage.
- Homebuyer education — Much like with the other TSAHC loan programs, a homebuyer education program must be completed before closing on the mortgage. These education courses can be found online or they can be completed in person.
Southeast Texas Housing Finance Corporation (SETH) Programs
The SETH programs were created in 1981 as part of the Texas Housing Finance Corporations Act. The SETH programs are nonprofit instruments of the governments of various cities and counties throughout Southeast Texas.
The primary purpose of the SETH is to offer tax-exempt, single-family mortgage revenue bonds. Those bonds are also available for multi-family housing projects. The SETH also provides homebuyer training. Additionally, it does not administer any Section 8 programs or contracts.
The SETH’s Board of Directors is composed of one representative from each jurisdiction of Southeast Texas.
5 Star Texas Advantage Program
The SETH offers Texas residents this 5 Star plan, which helps eligible applicants with the costs of down payments and closing costs in the form of grants. There is no repayment or recapture of the funds under this program, nor is there a second lien on the property.
The purpose of this program is to make funds available to hopeful homebuyers who need assistance in covering upfront costs, down payment requirements, closing costs and prepaid items required to obtain homeownership.
- Eligibility — There is no first-time homebuyer requirement to be eligible for this program. Also, eligibility requires for homes to be purchased within the program’s perimeters (in Texas, excluding the city limits of El Paso and Grand Prairie and in Travis County).
- Income Limit — Depending on where you live in Texas, the income limits to be eligible for this plan vary greatly. For instance, you can make significantly more if you live the Dallas-Fort Worth-Arlington area ($99,130 allowable gross household income in Collin, Dallas and Denton Counties) and still be eligible for the plan than you can if you live in the Waco area (McClennan County: $75,555 and Falls County: $61,755).
- Purchase price limit — Similar to the income limits, the purchase price limits tend to be much higher in the urban areas of Texas than in the rural areas. For example, Texans eligible for the 5 Star Texas Advantage program can spend up to $404,480 on a home in Dallas County as opposed to be limited to $331,760 on a home purchase in Montgomery, Waller and other smaller counties. The maximum allowed sales price for houses under this plan is $484,350.
- Credit score requirement — The minimum FICO score allowable for lenders using this plan is 640.
- Homebuyer education — All buyers on the mortgage for this plan must complete the online SETH Homebuyer Education class to be eligible.
This plan is designed to help Texas citizens classified as “Very Low Income” to become homeowners. The financial assistance is provided by the Southeast Texas Housing Finance Corporation (SETH). This GoldStar program is available to qualified homebuyers from all professions and it is available statewide through a network of participating lenders.
This program offers up to 7% of the final loan amount in the form of a forgivable second lien, meaning you won’t be required to repay the money. Assistance funds are provided through the three-year, seven-year and 10-year Community Second Liens. Those funds, which are considered to be forgiven at the end of the community second term, can be put toward your down payment and closing costs.
- Eligibility — There is no first-time homebuyer requirement with this plan. Buyers must occupy the property as their primary residence within 60 days of closing and borrowers are allowed to have ownership in other properties at the time of closing. Eligible properties for this plan are single-family homes, townhouses and condos, but manufactured homes are not allowed. One other catch with this assistance plan is that it excludes homes in Travis County and the cities of El Paso and Grand Prairie.
- Income limit — People classified as “very low-income borrowers” earning less than or up to 50% of their county’s median income regardless of family size also qualify for the Affordable Subsidy of $2,500. Texans classified as “low-income borrowers” earning greater than 50% of the their county’s median income qualify for the Affordable Subsidy of $1,500 in assistance.
- Purchase price limit — The maximum allowable home purchase price can’t exceed $484,350.
- Credit score requirement — This plan requires that each buyer listed on the mortgage must have at least one credit score of 620. A manual underwrite is not allowed.
- Homebuyer education — In order to be eligible for this assistance plan online or in-person training must be completed prior to registering for the loan. This training is required for all borrowers on the note, even non-first-time homebuyers. Showing the Certificate of Completion is a condition for the loan closing.
Homeownership Across Texas (HAT) Program
The HAT program provides grants to help qualified homebuyers reduce the amount of money they must pay out of pocket to purchase a home. Grants for the HAT program range from 1%-5% of the amount of the loan and can be applied to the down payment or closing cost fees. HAT grants are not loans, so they never have to be repaid. Also, there are no other closing costs tied into the HAT grant program.
- Eligibility — To be eligible for this program, the new or existing single-family home that you are planning to buy must be occupied by you and it must be your primary residence. Of course, these houses must be in Texas to be eligible. However, houses in Travis County and the cities of El Paso, Grand Prairie and McKinney are not eligible for this program.
- Income limit — Your income must fall at or below certain limits depending on the county that you live in in Texas. Those limits vary greatly, often depending on whether you live in an urban or rural area.
- Purchase price limit — The purchase price for a home under this plan must not exceed $548,250 for a Conventional, VA or USDA HAT loan.
- Credit score requirement — To be eligible for this assistance program, the lender requires that all borrowers listed on the note must have minimum credit scores of 620.
- Homebuyer education — You must complete this educational course online or in person and be able to present documentation before the loan closing is finalized.
Down Payment Assistance Programs from Cities and Counties in Texas
Various cities and counties, and other statewide and regional organizations, across the Great State of Texas also offer home-buying assistance programs and Down Payment Assistant opportunities. Often, that money can also be used to help defray closing costs as well. One of these programs is sure to fit your personal finances and make buying a home in Texas a possibility.
Here are some of the city and county programs offered throughout The Lone Star State:
Programs by City/Town:
- College Station
- Corpus Christi
- El Paso
- Fort Worth
- Grand Prairie
- New Braunfels
- San Angelo
- San Antonio
- San Marcos
- Texas City
- Wichita Falls
Programs by County:
Statewide and Regional Programs:
- Texas Department of Housing & Community Affairs – homebuyer programs, including down payment and closing cost assistance
- Habitat for Humanity – through volunteer labor, builds and rehabilitates houses for families in need
- S. Department of Agriculture Rural Housing – homebuyer programs in rural communities
- Veterans Land Board Housing Assistance Program – helps eligible Texas veterans purchase a home
- Texas State Affordable Housing Corporation – homebuyer programs, including down payment and mortgage assistance
More helpful links from HUD:
- Let FHA loans help you
- Find an FHA lender
- Homebuyer’s kit
- Fair housing
- Good Neighbor Next Door
- Loans for veterans
N.A. (ND) Texas Department of Housing and Community Affairs. Retrieved from https://www.tdhca.state.tx.us/au.htm
N.A. (ND) My First Texas Home. Retrieved from https://thetexashomebuyerprogram.com/products/my-first-texas-home
N.A. (ND) Do you qualify for help buying a home? Retrieved from https://www.tsahc.org/.
N.A. (ND) Home Sweet Texas and Texas Heroes Loan Program — Income and Purchase Price Limits. Retrieved from https://www.tsahc.org/public/upload/files/general/2020_Combined_Income_Purchase_Price_Limits.pdf
N.A. (ND) SETH Corporate Summary. Retrieved from https://sethfc.com/corporate-summary/
N.A. (2020, May 11). SETH 5 Star Income Limits. FHA/VA Loan Types. Exhibit A. Retrieved from https://sethfc.com/sethfc-content/uploads/2020/05/20-FHA-VA-Limits-5S.pdf
N.A. (2020, Jan. 1) SETH 5 Star Texas Advantage Program. FHA Maximum Purchase Price Limits. Retrieved from https://sethfc.com/sethfc-content/uploads/2020/01/2020-5S-FHA-Purchase-Price-Limits.pdf
N.A. (ND) SETH GoldStar Homebuyer Assistance Program — Conventional. Retrieved from http://www.gatewaycorrespondent.com/wp-content/uploads/2019/01/SETH-GoldStar-Product-Description-Conv-01.02.2019.pdf
N.A. (ND) Homeownership Across Texas. HAT Grant Program Overview. Retrieved from https://www.hatgrant.com/hat-program