First-time home buyer grants in Texas: A complete overview #CashNews.co

A first-time home buyer grant could be the essential element you need to buy a new home. Thankfully, Texas first-time home buyer grants offer big savings if you know where to find them. Learn about how to get assistance to overcome two of the biggest financial barriers to homeownership: down payments and closing costs.

What are first-time home buyer grants?

First-time home buyer grants are cash assistance programs designed to help first-time buyers pay for the upfront costs of buying a home, such as the down payment and closing costs. Many first-time home buyer programs offer helpful tools to save money on your first home, such as 0% interest loans. However, the unique benefit of first-time home buyer grants is that you do not have to repay them.

Whether you have to pay back the grant money is a key factor to look out for while researching first-time home buyer grants. Some programs are listed as grants, but they are really no- or low-interest loans you must repay eventually. In this article, we will only focus on first-time home buyer grants in Texas that you don’t have to repay.

Learn more: First-time home buyer programs in Texas

Dig deeper: Everything first-time home buyers should know in 2024

Who offers Texas first-time home buyer grants?

Texas has two statewide organizations that provide grants to first-time home buyers. The Texas Department of Housing and Community Affairs (TDHCA) is the state agency that oversees 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 mortgage 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.

Types of Texas first-time home buyer grants

TDHCA My First Texas Home program

The My First Texas Home program offered by TDHCA is for first-time home buyers and veterans. It includes down payment assistance worth up to 5% of your original mortgage amount. This down payment 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.

TSAHC Home Sweet Texas program

TSAHC’s Home Sweet Texas program offers two down payment assistance grants, both worth up to 5% of your original mortgage.

The first option is a direct grant that you can only use along with a government-backed first mortgage, such as an FHA, VA, or USDA loan. This grant allows you to receive 2%, 3%, 4%, or 5% of the mortgage amount for your new home. If you stay in the home for more than six months, you don’t have to repay the loan. Since this is direct cash assistance, you don’t even have a second mortgage lien on the home.

The second option is a three-year deferred, forgivable second mortgage you can use with government-backed or conventional loans. Instead of direct cash assistance, you receive the funds for down payment assistance in the form of a 0% interest loan you do not have to make payments on. If you live in the home for more than three years, the loan is forgiven, so you never have to make a payment on it. This loan is available for 2%, 3%, 4%, or 5% of your first mortgage amount to cover down payment or closing costs.

TSAHC Homes for Texas Heroes

The Homes for Texas Heroes program offers the same grant options as the Home Sweet Texas program, but they are reserved for home buyers with certain public service jobs.

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

• Professional educator in a Texas public school district (school teacher, teacher aide, school counselor, school librarian, or school nurse)

• First responder (firefighter, police officer, or EMS personnel)

• Public security officer

• Corrections officer or juvenile corrections officer

• Nursing or allied health faculty

• Veteran or active military member

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

It is important to note that these first-time home buyer grants are not stand-alone programs. They are parts of larger programs that include qualifying for and receiving 30-year mortgages from TSAHC and TDHCA. To qualify for the grants, you must also receive your original mortgage from the same program.

• 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: 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 based 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.

• Sales price: Each program has specific sales price limits based on a variety of factors. For example, TSAHC lays out its income and home price limits by county, family size, and more.

• Educational courses: All programs require you to attend a home-buyer education course.

How to apply to Texas first-time home buyer grants

Both TDHCA and TSAHC have relatively simple application processes you can complete with your chosen mortgage lender.

TDHCA application process

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

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

2. Get prequalified: Choose from a list of TDHCA-approved lenders that can both prequalify and 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 to 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. They’ll also work with TDHCA and your lender to finalize the deal.

Learn more: The best mortgage lenders for first-time home buyers

TSAHC application process

The TSAHC application process has four easy steps:

1. Take an eligibility quiz. Answer four easy questions to determine whether you qualify for a TSAHC program.

2. Find an approved lender. If you qualify, contact one of the TSAHC-approved mortgage lenders who can walk 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 for a TSAHC program.

4. Find and close on a home: Once you find the house you’d like to buy, your lender will work with TSAHC to finalize the loan terms and prepare you to close on the home.