Thinking about purchasing a home in Texas? There are plenty of mortgage assistance programs available to help you on your path to homeownership. In this blog, we’ll discuss the different loan programs, down payment assistance programs, eligibility requirements, and everything else you need to know. Let’s get started!
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What do I need to know before buying a house in Texas?
Before buying a house in Texas, it’s important to understand the loan options and down payment assistance programs available to you. These resources could make homeownership more affordable, helping you turn your dream of owning a home into a reality.
Does Texas have a first time home buyer program?
Yes, Texas offers several first time homebuyer programs that provide financial assistance to help eligible buyers purchase a home. These programs often include down payment help or grants, making it easier for first time buyers to secure their dream home.
Who is considered a first time home buyer in Texas?
In Texas, a first time homebuyer is defined as someone who has not owned or held an ownership stake in a home in the last three years. This includes anyone who has been living in a home as their main residence and is listed on the Deed of Trust.
How To Qualify As First Time Home Buyer In Texas
To qualify as a first time homebuyer in Texas, generally speaking, you must not have owned a home or held any ownership interest in a property within the past three years. However, specific eligibility requirements can vary by program. Additional criteria, such as income limits, minimum credit scores, and property location, may also apply.
Texas Homeowner Assistance Programs
Both the Texas State Affordable Housing Corporation (TSAHC) and Southeast Texas Housing Finance Corporation (SETH) offer various homeowner assistance programs. Here’s a closer look at some of their offerings:
Texas State Affordable Housing Corporation (TSAHC)
The Texas State Affordable Housing Corporation (TSAHC) is a nonprofit organization established by the Texas Legislature to assist both first time and repeat homebuyers achieve homeownership.
TSAHC Home Sweet Home Loan Program
The Home Sweet Texas Home Loan Program helps low and moderate-income individuals in designated areas achieve homeownership. Eligible borrowers could receive a mortgage loan and financial assistance for their down payment. These borrowers could choose between a non-repayable grant or a forgivable second lien loan for the down payment. The second lien loan only needs to be repaid if the home is sold or refinanced within three years.
TSAHC Homes for Texas Heroes Loan Program
The Homes for Texas Heroes Loan Program offers mortgage loans and down payment assistance to those who serve our communities, including teachers, first responders, corrections officers, and veterans. Eligible borrowers can choose between a non-repayable grant or a forgivable second lien loan for their down payment. The forgivable second lien loan is only required to be repaid if the home is sold or refinanced within three years.
First Time Home Buyer Texas Mortgage Credit Certificate (MCC)
First time homebuyers in Texas may qualify for the Mortgage Credit Certificate (MCC) program, which offers a tax credit equal to 15% of your annual mortgage interest payments. This directly reduces your federal income taxes, lowering your overall mortgage costs. To qualify, you must pair the MCC with a qualifying TSAHC Down Payment Assistance program.
Southeast Texas Housing Finance Corporation (SETH)
The Southeast Texas Housing Finance Corporation (SETH) promotes affordable housing opportunities for low to moderate-income individuals in Texas. Over the last 40 years, SETH has helped more than 30,000 Texas homebuyers by providing $160 million in down payment and closing cost assistance. Here’s an overview of the programs offered:
SETH MyHome Plus
The SETH MyHome Plus Program offers a 30-year fixed-rate mortgage along with down payment and closing cost assistance through a forgivable second lien. The amount of assistance depends on the final loan amount. Buyers can choose from FHA, USDA, VA, or conventional mortgage options. This program is available throughout Texas, except in Travis County and the cities of El Paso, McKinney, and Grand Prairie.
SETH 5-Star Program
The SETH 5-Star Program provides financial assistance to cover down payment and closing costs. Eligible borrowers receive a forgivable second mortgage, which is completely forgiven after three years of on-time payments. This program is compatible with various loan types, including FHA, USDA, VA, and conventional loans with a 30-year fixed-rate term. Eligible borrowers could receive up to 5% of the home’s purchase price as assistance through this program. The SETH 5-Star Program is available statewide, except for Travis County and the cities of El Paso, McKinney, and Grand Prairie.
SETH Extra Credit MCC Program
The SETH Extra Credit MCC Program offers a tax benefit at no cost to first-time homebuyers. Homeowners could claim a refundable tax credit equal to 20% of the mortgage interest paid annually. Participants in the 5-Star or MyHome Plus programs also receive a $2,500 MCC grant. This program is available in Austin, Brazoria, Chambers, Liberty, Matagorda, Walker, Waller, and Wharton counties, as well as in Baytown, Deer Park, Dickinson, La Marque, La Porte, Pasadena, Santa Fe, Shoreacres, Texas City, and Tomball.
FHA 100% DPA
Homebuyers in Texas might qualify for FHA 100% DPA, which provides 100% financing without a down payment requirement. This is achieved through a combination of a 1st and 2nd mortgage. The 2nd mortgage can be up to 3.5% of the sales price or the appraised value, whichever is less, with a term of 10 years.
Eligibility For 100% FHA DPA
To qualify for the program, borrowers need a minimum credit score of 620 and a maximum debt-to-Income (DTI) ratio of 45%. Eligible borrowers also need to complete an approved Homebuyer Education course and purchase one of the following types of properties: single-family homes, duplexes, manufactured homes, PUDs, townhouses, or condos.
Pros and Cons of Texas Mortgage Assistance
Texas Mortgage Assistance programs offer a variety of benefits to eligible borrowers. However, it’s important to weigh the pros and cons to determine if these programs are the best fit for you.
Pros of Texas Mortgage Assistance
- Accessibility to Homeownership: These programs could make buying a home more accessible for first time buyers by offering lower down payments and financial assistance.
- Variety of Loan Types: Many programs offer different loan options including conventional, FHA, VA, and USDA loans. This allows borrower to choose the loan that best mortgage program suiting their needs and credit score.
- Fixed Interest Rates: Many loan programs offer fixed interest rates which could save mortgage borrowers money over time compared to higher-interest variable rates. This could also give borrowers more stability in your monthly mortgage payment.
Cons of Texas Mortgage Assistance
- Strict Eligibility Requirements: These programs typically have specific eligibility requirements, such as income limits or the need to buy a home in a particular area, which could make it more difficult to qualify.
- Must work with Participating Lender: Programs may require borrowers to work with a participating lender that partners with TSAHC and SETH. Direct Mortgage Loans is a participating lender who can guide borrowers through the process, speak with one of our Loan Officer’s today!
- Limited Funding: Some programs have limited funds and operate on a first-come, first- serve basis. This could make it challenging to qualify if there are limited resources available.
First Time Home Buyer Loans In Texas
Conventional
Conventional loans are a good choice for homebuyers who want more options than government-backed programs can provide. They are not insured by the government; however, they follow standards set by Fannie Mae and Freddie Mac. They provide a wider range of down payment options and greater flexibility in choosing mortgage insurance.
VA Loan
A VA loan is a financing option for eligible service members, veterans, and surviving spouses. These loans are partially backed by the Department of Veterans Affairs and offer flexible terms tailored to veterans’ needs, including zero down payments.
FHA Loan
FHA loans are government-insured mortgages which offer flexible guidelines for borrowers who might not qualify for traditional loans due to limited down payment funds or lower credit scores.
USDA Loan
USDA loans are a government-backed mortgage option for homebuyers looking to purchase in a designated rural area. These loans, guaranteed by the U.S. Department of Agriculture, eliminate the need for a down payment and private mortgage insurance (PMI).
Good Neighbor Next Door Program
The Good Neighbor Next Door program provides housing incentives for law enforcement officers, firefighters, emergency medical technicians, and teachers to assist these professionals with their home purchases. Eligible buyers could receive a 50% discount on the listing price of a single-family home in a revitalization area, provided they live in the property for a minimum of three years.
How To Apply For First Time Home Buyer Texas DPA Programs
- Find a Participating Lender: Connect with a participating lender to learn about the program options and to confirm your eligibility. Direct Mortgage Loans is a participating lender, speak with a Loan Officer today!
- Gather Required Documents: Once you confirm your eligibility, gather the documents needed to apply for the program. This usually means collecting pay stubs, tax returns, and bank statements.
- Get Pre-Approved for a Mortgage: Submit your documents and mortgage application to your lender.
- Complete Homebuyer Education Course: Many Texas Homeowner Assistance programs require you to complete a homebuyer education course.
FAQ’s About First Time Buyer Texas Down Payment Assistance Programs
What is the income limit for the first Texas home program?
The income limits, set by the Texas Department of Housing and Community Affairs (TDHCA), vary based on household size. Generally, the income limits range from $74,500 to $101,600 for one or two people, and from $85,675 to $115,920 for three or more people. It’s important to note that these are general guidelines, and actual limits could vary depending on the specific program and location.
Can you buy a house with 0 down in Texas?
If you are interested in purchasing a house with zero down payment in Texas, then there are several loan options to consider. For example, USDA, VA, and FHA 100% Financing loans do not require a down payment for eligible borrowers. Contact a Loan Officer to find out if you qualify for any zero down payment loans.
How does down payment assistance work in Texas?
Down payment assistance programs in Texas offer financial support to eligible homebuyers to help cover the costs associated with a down payment and closing costs. These programs typically provide assistance in the form of grants, forgivable loans, or low-interest loans. The specific details and requirements could vary between programs.
How much down payment assistance can I get in Texas?
The amount of assistance you may receive depends largely on the specific program for which you qualify. Factors such as income, the chosen program, and the home’s price all influence the amount you could receive. To determine the maximum assistance you qualify for, it’s best to contact a participating lender.
Down payment programs subject to additional eligibility requirements that may vary. Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Loan products described here may not be available at the time of application. All products are subject to eligibility and availability. Reach out to your lender to learn more. Direct Mortgage Loans, LLC NMLS ID# is 832799 (http://www.nmlsconsumeraccess.org ). Direct Mortgage Loans, LLC office is located at 11011 McCormick Rd Suite 400 Hunt Valley, MD 21031. Equal housing lender.
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