First-time home buyer programs in Texas #CashNews.co

They say everything is bigger in Texas, and that holds true for Texas first-time home buyer programs. Texas has two statewide organizations that offer multiple types of first-time home buyer programs, from low-interest loans to down payment assistance. Follow along to find out whether you qualify for these innovative programs.

Dig deeper: How to buy a house

Who offers Texas first-time home buyer programs?

Texas has two statewide organizations that provide affordable housing programs to first-time home buyers. The Texas Department of Housing and Community Affairs (TDHCA) is the state agency in charge of affordable housing programs, while the Texas State Affordable Housing Corporation (TSAHC) is a nonprofit organization created by the Texas Legislature to serve as an affordable housing provider. Neither organization provides the loans directly. Instead, they work with approved private lenders.

You can also find local first-time home buyer programs at the county and municipal levels through the U.S. Department of Housing and Urban Development’s website.

Both organizations have two first-time home buyer programs designed for low-to moderate-income individuals to access the help they need to buy their dream home.

Read more: What is a mortgage?

Types of Texas first-time home buyer programs

TDHCA and TSAHC both have two main loan programs that offer multiple ways for first-time home buyers to save money:

TDHCA My First Texas Home program

The My First Texas Home program offers multiple ways to save with just one program. Most importantly, first-time home buyers and veterans can get a 30-year mortgage with a fixed low interest rate to increase the affordability of homes across the state. The loan must be an FHA, VA, or USDA loan.

Along with this loan, you can receive assistance worth up to 5% of the first mortgage amount to use on the down payment or closing costs. This additional assistance comes in the form of a forgivable 0% interest second mortgage, so you don’t have to make monthly payments or repay the second mortgage at all.

The program also gives you access to a mortgage credit certificate (MCC) that can help you save money on your federal income taxes. The MCC is a dollar-for-dollar federal income tax credit based on how much you pay in interest on your mortgage. For example, if you have a $100,000 loan with a 6% interest rate, you will pay $6,000 in interest annually. With a 20% MCC through My First Texas Home, you can save 20% of that $6,000 ($1,200) on your federal income taxes. The most you can save through this program is $2,000 per year.

Learn more: What to know in 2024 about the first-time home buyer tax credit

TDHCA My Choice Texas Home

The My Choice Texas Home program offers many of the same essential savings as My First Texas Home program but with some key differences. My Choice Texas Home offers low-interest, fixed-rate loans and down payment or closing costs assistance worth up to 5% of the loan amount. However, the program is also available to repeat home buyers and home buyers with higher incomes. The program also works with conventional loans as well as the government-backed FHA, VA, and USDA loans. On the downside, you cannot receive an MCC through the My Choice program.

TSAHC Home Sweet Texas

The Home Sweet Texas program offers FHA, VA, USDA, and HFA (housing finance agency) conventional first mortgages. All of these loans must be 30-year fixed-rate loans. You can also receive down payment or closing cost assistance through a first-time home buyer cash grant or a 0% interest loan that is forgivable after three years. Both of these options can get you up to 5% of your loan amount to help pay for your down payment or closing costs.

Dig deeper: A complete guide to first-time home buyer grants in Texas

The program is not exclusive to first-time home buyers, but you can get extra benefits if you are buying your first home by accessing a 20% MCC.

TSAHC Homes for Texas Heroes

The Homes for Texas Heroes program also offers 30-year fixed-rate mortgages and down payment assistance worth up to 5% of the loan amount, but it is reserved for home buyers with certain public service jobs.

You must have a job in one of these categories to qualify:

• Professional educator (school teacher, teacher aide, school counselors, school librarians, and school nurses in the public school system)

• First responder (fire fighters, police officers, and EMS personnel)

• Public security officer

• Veteran or active military member

• Corrections or juvenile corrections officer

• Nurse or allied health faculty

If you’re a first-time home buyer, you can also use an MCC to save on your federal income taxes. If you combine an MCC with down payment assistance, you don’t have to pay the typical $500 MCC fee.

Do I qualify for Texas first-time home buyer programs?

Specific eligibility requirements will depend on the type of program and the mortgage lender you choose. However, both organizations have some general eligibility requirements:

• First-time home buyer definition: Both TSAHC and TDHCA define “first-time home buyer” as someone who has not owned a home in the last three years.

• Credit score to buy a house: The minimum credit score required for all of the programs listed above is 620, except for TSAHC HFA conventional loans, which require a 640 credit score.

• Debt-to-income (DTI) ratio: TDHCA requires a maximum DTI ratio of 45% to 50%, depending on how much money you have in reserves. TSAHC may have DTI requirements on government-backed loans depending on your credit score and the lender’s underwriting methods.

• Income level: Each program has specific income limits based on the median income of the area where you are buying. For example, TDHCA lists income limits for its My First Texas Home benefits by county, type of home loan, and more.

• Sales price: Each program has specific sales price limits based on the type of home and the area it is in.

• Educational courses: All programs require attending a home buyer education course to qualify.

How to apply to Texas first-time home buyer programs

Both organizations have simple application processes that allow you to work with your chosen lender to complete.

TDHCA Application Process

TDHCA outlines three steps to apply for one of their programs:

1. Educate yourself: TDHCA offers a free online home-buyer education course to learn about the entire home buying process before you start looking for a home.

2. Get prequalified: You can choose from a list of TDHCA-approved lenders that can preapprove you for a mortgage with TDHCA assistance as part of the loan package. You don’t even have to fill out an application directly with the TDHCA.

3. Work with a real estate agent to find a home: A real estate agent can help you find a home you can afford based on the loan amount you qualify for and work with TDHCA and your lender to finalize the deal.

TSAHC Application Process

The TSAHC application process has four easy steps:

1. Take their eligibility quiz. You just need to answer four easy questions to determine whether you qualify for one of the programs.

2. Find an approved lender. If you qualify, contact one of the TSAHC-approved lenders who can guide you through the rest of the loan process.

3. Fill out the application: You will work with your lender, not TSAHC, to fill out the necessary documents needed to utilize a TSAHC program.

4. Find and close on a home: Once you find the home you’d like to buy, your lender will work with TSAHC to finalize the loan terms and prepare you to close on the home with no hiccups along the way.