Homebuying in Texas: 3 Options for Down Payment Assistance
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Leslie Osmond, Contributing AuthorClose
Leslie Osmond Contributing AuthorLeslie is a licensed Realtor in Missouri and freelance writer that’s developed content for several online and offline mediums. While her writing specializes in financial concepts, she loves trending topics, technology, travel, and pop culture and incorporates these subjects into her pieces. Launching her career as a ghostwriter, Leslie has contributed content for articles in US News & World Report, TheStreet, Kiplinger, Fox Business, and is a Finance Writer for Seeking Alpha.
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Fran Metz, Contributing EditorClose
Fran Metz Contributing EditorFran Metz is a freelance content writer, editor, blogger and traveler based in Las Vegas, Nevada. She has seven years of experience in print journalism, working at newspapers from coast to coast. She has a BA in Mass Communications from Fort Lewis College in Durango, Colorado, and lived in Arvada for 15 years, where she gained her experience with the ever-changing real estate market. In her free time, she enjoys 4-wheeling, fishing, and creating digital art.
According to the 2024 Texas Relocation Report, Texas has become home for more than 668,000 people, with a net population gain of nearly 175,000 residents since 2022. This family-friendly state has something for everyone. Whether you’re an outdoor enthusiast wanting to horseback ride through Dallas ranches, looking to relax on the beaches of Galveston or South Padre Island, passionate about the arts in Austin, or a food lover eager to explore Houston’s culinary scene, Texas offers something for every taste.
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The cost of living and home prices in Texas are also cheaper when compared to states like California and New York. Tax incentives make the Lone Star State appealing, and as one of the eight states in the US without personal state income tax, Texas is a great place to own a home and turn the American Dream into reality.
One of the biggest challenges for first-time homebuyers is saving for a down payment. An influx of new businesses and residents has driven up demand in Texas, resulting in limited inventory and soaring home prices. This supply-and-demand imbalance suggests prices will continue to rise, requiring buyers to increase their purchasing power.
With mortgage rates at an all-time high, home prices nationwide have compromised buyers’ purchasing power. However, various programs in Texas offer down payment assistance. Knowing where to look can help you determine if you qualify. We researched and interviewed real estate experts across the state to find three down payment assistance options that offer great benefits. Here’s how you can take advantage of them!
What is down payment assistance?
When purchasing a home, it is essential to consider the amount you will contribute toward the down payment.
Down payment assistance (DPA) helps buyers by offering loans or grants to reduce the amount those buyers must save for a down payment. A down payment typically is equal to a percentage of the cost of the home, and the minimum amount varies depending on the type of loan you receive. For example, if a house costs $300,000 and your loan requires a 5% down payment, you must have $15,000 at the time of purchase to put down on that house.
There are a few types of DPA programs available to Texas buyers, including grants and loans. You do not have to repay the grant option if you follow all the program rules. So if you qualify, this may be the way to go. Other options may require repayment.
- Grants: Gifted money. This money typically comes from state-funded agencies or non-profits and does not have to be repaid.
- Loans: A second mortgage you take out to cover down payment costs. Some have to be repaid, while others can be forgiven if you follow program rules closely.
- Deferred loans: Second mortgages with delayed payments; these are typically repaid when the buyer moves, sells, or refinances the home.
- Forgivable loans: Certain conditions must be met for all or part of the loan to be forgiven; if those conditions are not met, the buyer must repay the loan in full when they buy, sell, or refinance.
While there are many down payment assistance options, it is essential to find the best for you. We will discuss three specific programs offered in Texas that can prepare you for homeownership.
How to find down payment assistance
Whether relocating for work or a first-time home purchase, buying a home is not easy, so it’s important to prepare. When beginning the search for DPA programs, the Internet is a valuable tool. You can search keywords like “Texas down payment assistance,” which can direct you to local programs. It’s also a good idea to look into a trusted real estate agent, lenders, and other resources that collaborate with buyers looking for DPA.
Most DPA programs tend to be localized and run at the city and county levels, so determining where you would like to live is another factor to consider.
One of the first steps is to speak with a lender. But it is important to work with a lender who knows about DPA; not all lenders can accept or work with DPA.
To find a lender, check with the city and county housing agencies where you would like to live.
For example, if you were interested in moving to Fort Worth, the City of Fort Worth has a department designated to helping first-time homebuyers. In addition to their Homebuyer Assistance Program (HAP), they also offer a list of lenders that work with clients in search of DPA as well as point them to the most appropriate programs.
“You need someone who is familiar,” said Swapnil Sharma, a top agent in the Dallas-Fort Worth area, who regularly works with DPA clients.
“When we work with our buyers, we connect them to a lender, and then the lender — who is really well-versed in these programs — will ask them to apply online, which is like a 10- to 15-minute process,” Sharma says.
Sharma and her team have worked with tried and tested lenders who are familiar with Texas DPA programs. Working with an experienced real estate agent also guides buyers in making realistic offers on homes based on the market, and agents are great resources when navigating the inspection and closing processes.
When applying for DPA, consider factors like your income, the loan type, the cost of the home, and the amount of funding you’ll need. If you want a lower monthly mortgage payment, then a more significant down payment is usually necessary. The key is allowing your lender to aid in figuring out which DPA option is best for you.
Down payment assistance programs in Texas
Texas Department of Housing & Community Affairs (TDHCA)
Texas homebuyers have options when selecting a down payment assistance program. Texas Department of Housing & Community Affairs (TDHCA) is a government agency that offers statewide affordable housing, home loans, DPA, and closing cost assistance through a network of lenders.
TDHCA grants and loans
TDHCA focuses on grants and loans. They have a range of options, including down payment and closing cost assistance through their Texas Homebuyer Program.
We’ve listed some of the main features of TDHCA programs below.
- Income limits: Between $90,000 and $130,000, depending on county
- Purchase price limits: This varies based upon area and county. Purchase price limits for houses for sale in Austin is $510,939; cities like Dallas and Fort Worth show purchase price limits of $577,842 to $706,251.
- Minimum credit score: 620
- Cannot combine with a Texas Mortgage Credit Certificate
- Other eligibility requirements might apply
- No first-time homebuyer requirement
- 30-year fixed interest rate mortgage loans
- Down payment assistance and closing cost assistance from between 3% and 5% of the loan amount
- Available statewide via a network of participating lenders
- Buyers can use FHA, VA, USDA, or conventional loans
Texas State Affordable Housing Corporation (TSAHC)
Texas State Affordable Housing Corporation (TSAHC) is a 501(c)(3) organization that provides affordable housing throughout the state of Texas. By partnering with developers and financial institutions, TSAHC builds housing to serve its Texas residents.
In addition, private donations and selling tax-exempt affordable housing have allowed TSAHC to become one of Texas’s largest affordable housing providers, while also serving buyers through down payment assistance. Take the eligibility quiz to see if you qualify.
There are two homebuyer options in the form of either a grant or a three-year deferred forgivable second loan. Both programs offer the same DPA options below.
- Income limits:
- $128,875: Dallas, Collin, Denton, Ellis, and Rockwall counties
- $119,851: Tarrant and Johnson counties
- Purchase price limits vary. Targeted (economically distressed) areas in popular counties like Austin-Round Rock tend to have income limits up to $163,520. Counties like San Antonio and Braunfels have income limits under $134,355.
- Minimum credit score: 620
- Completion of an approved homebuyer education course
- Other requirements may apply
- No first-time homebuyer requirement
- 30-year fixed interest rate mortgage loans
- Down payment assistance up to between 3% and 5% of the loan
- Available statewide via a network of participating lenders
- Can use FHA, VA, USDA, or conventional loans
- The three-year deferred forgivable second loan details:
- It is a 0% interest second loan that can be used toward the borrower’s closing costs, or down payment, any prepaid items, principal reduction, or related mortgage fees and expenses.
- The lender funds the loan at closing, and it is forgiven in full after the third year, if the following conditions are met:
- The borrower has lived in the house as a principal residence for three years
- The borrower has made on-time payments throughout the three years of the loan
- The borrower hasn’t sold the house or refinanced the loan
- If those conditions are not met, the borrower has to repay the loan.
Southeast Texas Housing Finance Corporation (SETH)
Southeast Texas Housing (SETH) supports affordable housing for low- and moderate-income Texans. As the first local housing finance agency, SETH provides loan offerings, and it was also the first to offer homebuyer education.
For more than 40 years, SETH has provided $160 million in down payment assistance and help with closing costs, and it has assisted more than 30,000 Texas homebuyers. Below is a list of features. Check out the SETH website for more information.
- Income limits: $85,840 to $150,220 in Dallas-Fort Worth counties
- Purchase price limits: $484,350
- Minimum credit score: 640
- Completion of an approved homebuyer education course
- Excludes the cities of Grand Prairie and El Paso, and Travis County
- Must be owner-occupied
- Other requirements might apply
- No first-time homebuyer requirement
- 30-year fixed interest rate mortgage loans
- Down payment assistance from between 3% and 7% of the loan
- Available statewide via a network of participating lenders
- Can use FHA, VA, USDA, or conventional loans
- A three-year forgivable second mortgage option is also available, which allows eligible homebuyers to finance their down payments, closing costs, and home improvements by way of a Community Second Loan. This Community Second Loan is completely forgiven after three years if the following conditions are met:
- The borrower has lived in the house as a principal residence for three years
- The borrower has made on-time payments throughout the three years of the loan
- The borrower hasn’t sold the house or refinanced the loan
Closing
Down payment assistance is a great resource that many people do not realize is available. If you are interested in DPA, determine your eligibility using this calculator. Next, find an approved lender, the most crucial step in the process in ensuring that you qualify and all paperwork is in order.
Whichever Texas DPA program you choose, comparing rates and lenders can save you money. A qualified real estate agent who works regularly with down payment assistance in your area is one of your most valuable resources.
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