First Time Home Buyer Programs & Grants in Texas

    Couple buying first home in Texas

    If you’re a Texas first-time homebuyer, the process can seem overwhelming and intimidating. The challenges include a tight supply of homes and rising prices. But there’s help available that can make the process much easier to navigate.

    There are several programs offered through the Texas Department of Housing and Community Affairs (TDHCA) — along with a variety of community, state and federal first-time homebuyer programs — that include everything from advice to financial counseling to affordable plans.

    Organizations like TDHCA, the state’s housing authority, and other government programs work with approved lenders to help first-time Texas homebuyers negotiate the costs.

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    The median price (half sold for more, half for less) for a single-family home in Texas in August of 2020 was $252,000, according to Texas Realtors, an organization that represents Texas’ real estate brokers. Prices held steady during mandatory shelter-in-place orders related to COVID-19, according to Jim Gaines, chief economist with the Real Estate Center at Texas A&M University.

    Gaines expects an ongoing tight market with limited availability of affordable inventory. For the seventh straight year, more than half-a-million people are expected to move to Texas (563,945 people moved to Texas in 2019, according to the U.S. Census Bureau) and many of them will want to get a mortgage and buy a home. So, expect prices to continually rise.

    With that sort of competition for a new home, Texas consumers should become familiar with resources that can help navigate a tight market. It could be the necessary step to putting you into your dream home.

    Making Sense of Texas Homebuyer Resources

    When researching housing options and the variety of Texas first time homebuyer programs, it’s important to become familiar with the agencies, programs and products. Most of them go by acronyms, so let’s get a taste of the alphabet soup.

    We will be referring to these important agencies/programs in this article:
    • TDHCA The Texas Department of Housing and Community Affairs is the go-to agency for low-to-moderate-income Texans who are looking to buy a home. It provides resources and programs to make the process clearer and more affordable.
    • FHA The Federal Housing Administration, created during the Great Depression in 1934, insures mortgages and construction standards. Generally, a 3.5% down payment is expected, although in some cases, down payments can be avoided. Credit score must be 500 or above.
    • HUD The U.S. Department of Housing and Urban Development, which oversees the FHA, has a variety of programs to help homebuyers, including veterans and their spouses. HUD also offers extensive guidance on your rights as a homebuyer, while giving tips on how to shop for a home and a mortgage.
    • USDA The U.S. Department of Agriculture Development agency has programs for homebuyers in rural areas. These aren’t available if you qualify for a conventional loan. If your credit score qualifies, it could be for 100% of your loan. Your adjusted household income can’t surpass 115% of the area’s median income.
    • VA The U.S. Department of Veterans Affairs provides mortgage loans to members of the military, veterans and their spouses. It is just the place for veterans who struggle getting a down payment because of little monthly income and savings. You can get as much as 100% of the price covered by your loan, although there are funding fees that range up to 2.4% (something of a substitute down payment).
    • PMI Private mortgage insurance, which is usually required for borrowers whose down payment is less than 20%. It helps protect lenders if the borrower can’t pay and faces foreclosure. It’s likely this will be required for low-to-moderate-income homebuyers, who have down payments of around 3%.

    You will see references to 30-year fixed mortgages when you’re looking into buying a home. That’s the choice for 90% of all homebuyers. A 30-year fixed mortgage means that you pay back the loan for the house over 30 years. The interest rate and monthly payment does not change. It’s the most common mortgage because monthly payments are lower and more affordable than 15-year rates.

    Texas Housing Help for First-Time Buyers

    One of the first places to visit if you’re a first-time Texas homebuyer is TDHCA, which was created in 1991 when the State Legislature consolidated functions formerly administered by the Texas Department of Community Affairs and the Texas Housing Agency. It administers about $2 billion in annual services, utilizing mortgage revenue bond financing, federal grants and federal tax credits.

    TDHCA works with communities, nonprofits, developers, the federal government and more to create and carry out programs that help people find the right home. It has programs for buyers, as well as renters, and programs for developers that encourage them to build affordable homes. Potential homebuyers must meet certain income and credit standards. Generally, they must be buying their first home to qualify for the Texas first-time homebuyer programs.

    They are a big help to first time Texas homebuyers with bad credit.

    Here are some of TDHCA’s key programs:

    Texas First Time Home Buyer Qualifications

    The Texas First Time Home Buyer programs include 30-year fixed rate mortgage loans that offer assistance for down payments and closing costs up to 5% of the loan amount.

    There are several key criteria used to qualify as a first-time homebuyer.
    • You must be a first-time home buyer, a veteran or someone who hasn’t owned a home in the last three years.
    • You must have a minimum credit score of 620.
    • There are TDHCA income limits (ranging from $74,500 to $101,600 for one or two people, then a range from $85,675 to $115,920 for three or more people). There are also purchase price limits (ranging from $294,600 to $359,460 in most areas).

    My First Texas Home Program

    My First Texas Home Program is an excellent option for first-time home buyers, although you’re also eligible if you haven’t been a homeowner within the last three years. Perfect for low-income borrowers, it provides a 30-year fixed-rate loan with good interest rates and forgiving credit stipulations.

    Other characteristics:
    • You can get a loan, worth up to 5% of the home’s value, to help with your down payment and closing costs.
    • A minimum credit score of 620 is required.
    • It’s available to qualified home buyers from all professions through a network of participating lenders.
    • There’s a bonus option of dollar-for-dollar reduction on federal tax liability through the TDHCA’s Texas Mortgage Credit Certificate Program.

    Texas Mortgage Credit Certificate Program

    The Texas Mortgage Credit Certificate Program provides additional savings to Texas first time home buyers on their federal income taxes.

    Some features:
    • It’s available to first-time homebuyers, veterans or homebuyers who haven’t owned a home within the past three years.
    • It’s a dollar-for-dollar reduction on federal tax liability for as long as you owe on the mortgage loan and live in your first home. Homebuyers can claim a tax credit for some portion of the mortgage interest paid per year.
    • There’s no minimum credit score requirement and it can be combined with a My First Texas Home mortgage loan.

    My Choice Texas Home Program

    For Texas homebuyers of all professions, the My Choice Texas Home Program provides home loans, along with assistance for down payments and closing costs.

    Some features:
    • There is no first-time homebuyer requirement.
    • Assistance for down payment and closing costs up to 5% of the loan amount.
    • FHA, VA and USDA loans can be used.

    Texas Bootstrap Loan Program

    A Texas Bootstrap Loan is a unique program for first-time homebuyers. Instead of helping you purchase a home, it literally has you building the home. In fact, you will be known as an “owner-builder.’’

    Some features:
    • Although very labor intensive and time consuming, it could work for low-income families with limited home buying options.
    • You’ll be under the supervision of a Nonprofit Owner-Builder Housing Provider (NOHP) that is certified by Texas. That will make sure you know what you’re doing and you’re aware of all laws.
    • You’re required to do at least 65% of the labor associated with the building.
    • You can’t have an income higher than 60% of the state/local median family income.
    • The maximum benefit is $45,000, although you can seek financing from other lenders.

    Homes for Texas Heroes

    Homes for Texas Heroes funds between 3% and 5% of the total loan amount, which can be put toward the down payment and/or closing costs. And here’s the good part. It’s a gift (no repayment terms) and there is no requirement to live in the home for a minimum time. The program, featuring a 30-year fixed rate mortgage with several rates and loan options, is designed to help eligible applicants who need assistant with upfront costs.

    The eligible professions include:
    • Allied Health Faculty Member
    • Corrections Officer
    • County Jailers
    • Emergency Medical Services Personnel
    • Fire Fighters
    • Juvenile Corrections Officers
    • Military Veteran
    • Nursing Faculty Member
    • Peace Officer
    • Professional Educator
    • Public Security Officer

    Texas First Time Home Buyer Application Steps

    So … how to start? Need some First Time Home Buyer Texas steps?

    Here’s the typical methods you should take — whether it’s through the TDHCA or other means — to get you going toward purchasing your first home.

    1. Prequalify for a Mortgage Loan

    Determine how much you can afford. Lenders can assist by reviewing your credit report and employment information. Once you know how much you can afford monthly for a home, the lender can determine your price range and you can get pre-approved for the loan.

    2. Check Out Eligible Properties

    You can begin your search by looking at online resources; checking the local newspaper; contacting a local building contractor; or working with a real estate agent. You can use the search tool at TexasRealEstate.com . Once you find a home that meets your needs, you will need to make an offer, negotiate a price and execute a contract. When you sign the preliminary agreement to purchase a home you will be asked to pay a deposit. This deposit is called the earnest money.

    Through My First Texas Home, eligible properties include single family units, single units in condominium developments, manufactured housing and duplexes. My First Texas Home has funds set aside for targeted area loans (where 70% or more of the families have incomes that are 80% or less of the statewide median income).

    3. Gather Important Documents

    You must take personal financial information to your lender to apply for the loan. At loan application, you will need:

    • Recent bank statements for all of your accounts
    • Pay stubs for the past three months
    • Tax returns for the past three years
    • W-2 forms for the past two years
    • Information about your long-term debts (names of creditors, account numbers, payment amounts)
    • Proof of any current income
    • The executed sales contract

    4. Review Rates, Fees and Requirements

    Now it’s time to cover the bases.

    • Current interest rate and exact closing costs are available through the lender.
    • All interest rates obtained through My First Texas Home or My Choice Texas Home are 30-year fixed annual percentage rate mortgage loans.
    • Must qualify under FHA and VA guidelines.
    • Homebuyer must occupy home within 60 days of closing.
    • There are closing cost fees, of course, but TDHCA limits the fees participating lenders can charge to help minimize the costs of closing the loan. Lenders will have a list of all associated fees.

    5. Find a Qualified Lender

    You’ll want a lender who has successfully completed the TDHCA Down Payment Assistance/Texas Homeownership Programs continuing education training.

    Click here to find a Texas First Time Homebuyer Specialist near you.

    Texas First Time Homebuyer Grants

    There are some mortgage loans, down payment assistance grants and mortgage credit certificates available through the following programs:

    Homes for Texas Heroes: As already covered, these are earmarked for teachers, fire fighters, EMS personnel, police and correctional officers and veterans.

    Homes Sweet Texas Home Loan Program: These are for Texas homebuyers with low-to-moderate incomes.

    Under these programs, there are 30-year fixed rate mortgage loans with down payment assistance as a grant (does not need to be repaid) or a forgivable second lien loan.

    Homebuyer Education and Pre-Purchase Counseling

    Purchasing your first home can be a complicated process. You can benefit from online homebuyer education and credit counseling. For more information, check out mortgage counseling.

    Max Fay

    Max Fay is an entrepreneurial Millennial whose thoughtful writing shows he has a keen eye on both. Max has a genetic predisposition to being tight with his money and free with financial advice. At 25, he not only knows what an “emergency fund” is, he already has one. He wrote high school and college sports for every major newspaper in Florida while working his way through Florida State University. That experience was motivation to find another way to succeed financially and he has at Debt.org. Max can be reached at mfay@debt.org.

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