Many Texans who want to purchase a home assume they need a large down payment—or that assistance programs are available only to first-time buyers. Neither assumption is always correct.
Texas has programs designed to help qualified buyers overcome one of the biggest barriers to homeownership: the upfront money needed for a down payment and closing costs. Some programs may even be available to people who have owned a home before.
What is down-payment assistance?
Down-payment assistance, commonly called DPA, helps an eligible buyer cover some of the upfront cost of purchasing a home.
Assistance can take several forms, including:
- A grant that does not have to be repaid.
- A forgivable second-lien loan.
- A deferred second mortgage that becomes payable later.
- Assistance offered through a city, county, nonprofit organization, housing agency, employer or participating lender.
The terms matter. Buyers should understand whether the assistance is a grant, a loan or a forgivable lien—and what happens if they sell or refinance the home.
A Texas program for first-time and repeat buyers
The Texas State Affordable Housing Corporation, or TSAHC, provides mortgage loans and down-payment assistance through participating lenders.
According to TSAHC, its assistance programs may be available to both first-time homebuyers and repeat buyers. Current options include assistance structured as either a grant or a deferred, forgivable second lien.
TSAHC identifies two primary programs:
Homes for Texas Heroes
This program serves qualifying Texans in designated professions, including:
- Veterans and active-duty military members
- Professional educators
- Police and public-security officers
- Firefighters and emergency medical personnel
- Correctional officers
- Certain nursing and allied-health faculty
Home Sweet Texas
This program may serve eligible Texas buyers who do not qualify through one of the designated Texas Heroes professions.
Eligibility is more than a job title
A buyer’s occupation is only one consideration. TSAHC currently states that applicants must have at least a 620 credit score and meet applicable income requirements.
Eligibility and available assistance can also depend on:
- Household income
- Loan type
- Purchase price
- Property location
- Credit qualifications
- Occupancy requirements
- Available program funding
- The participating lender’s underwriting
TSAHC directs prospective buyers to begin with its eligibility process and then apply through an approved participating lender. Buyers must also complete an approved homebuyer-education course before closing.
Assistance is not automatically the least expensive option
Receiving more assistance does not necessarily mean receiving the best overall mortgage.
The interest rate, mortgage-insurance expense, second-lien terms, closing costs and total monthly payment should all be considered. A program advertised as having “no rate cost” or “no income limits” may refer to one specific lender product—not every assistance program available in Texas.
Before choosing a mortgage, request and compare complete Loan Estimates. Important questions include:
- Is the assistance a grant or a loan?
- Does it have to be repaid if I sell or refinance?
- Is there a forgiveness period?
- Does accepting assistance change my mortgage rate?
- What will my complete monthly payment be?
- How much cash will I still need at closing?
- Are there income, credit, location or purchase-price limits?
- Can the assistance be combined with FHA, VA, USDA or conventional financing?
Start before beginning the home search
Buyers should investigate assistance before seriously shopping for homes. A participating lender can determine eligibility, calculate the complete payment and explain how the assistance affects the loan.
Once the financing range is understood, a real estate broker can focus the property search on homes that match both the buyer’s needs and the program requirements.
TexasVet Realty Group can help North Texas buyers locate participating lending resources, understand the home-search process and identify properties that fit their approved financing.
Program funding, rates and requirements can change. Mortgage approval and assistance are subject to the buyer, property, loan program and participating lender.
Sources
Texas State Affordable Housing Corporation: Loans and Down Payment Assistance
Consumer Financial Protection Bureau: Homebuying Tools and Resources