First-Time Homebuyer Programs in Texas

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Edited byLilian Mironga
Edited byLilian Mironga

Updated: April 22, 2023

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The journey toward homeownership can be challenging, especially for first-time homebuyers. In this guide, MoneyGeek dives into different first-time homebuyer programs in Texas to help you finance your new home.

Keep in mind that the best homebuyer program for you should cater to your specific needs and financial background.

What Is a First-Time Homebuyer Program & How Can It Help?

Before buying a home, it's advisable to evaluate your budget. Your down payment, which is the money you pay upfront, is a significant factor that can impact your monthly expenses. For instance, homeowners typically secure lower interest rates if they pay a larger down payment.

Generally, a down payment is 20% of your home's total cost. This rate can be pricey for some homebuyers. It's best to shop around for different homebuyer programs to find the best rate for your situation.

Thankfully, there are mortgage programs in Texas that can help you finance your path toward homeownership. For instance, there are zero-down-payment programs like USDA and VA loans and low-down-payment programs like conventional and FHA loans. Texas also has state-specific loans that are only available to its residents.

MoneyGeek highlighted key details about Texas first-time homebuyer programs, so you can choose the loan that best suits your needs.

Zero-Down-Payment Loan Programs

With zero-down-payment mortgages, you don't need to put money down when purchasing a home. The USDA and VA loans are two government-sponsored loans that don't require a down payment.

USDA Loans

A USDA loan is designed for individuals living in eligible rural areas with low to moderate income. The U.S. Department of Agriculture issues USDA loans through its Rural Development Guaranteed Housing Loan program.

With a USDA home loan, you can purchase or refinance an existing home at a competitively low rate. First-time homebuyers will be happy to learn that USDA loan programs will likely accept those with bad credit. Lenders charge low origination fees (2% of the total loan amount).

Your property must be 2,000 square feet or below to receive a USDA loan. In addition, the rural area must have less than 35,000 people, and you must meet certain income limits depending on where you live.

Please note that USDA loans also have a fixed rate of 1% and a repayment period of 20 years.

VA Loans

Issued by the U.S. Department of Veterans Affairs, a VA loan caters to the homebuyer needs of eligible military personnel and their families. One of the shining qualities of a VA loan is that you don't need to pay a down payment upfront. A VA home loan is a better option for eligible borrowers than conventional loans.

VA loans have more relaxed requirements, especially for minimum credit scores, property types, debt-to-income ratios and loan limits. However, these requirements vary per lender.

Compared to private loans, a VA mortgage also has lower interest rates. It does not require purchasing private mortgage insurance (PMI). With VA loans, borrowers can build a new home, buy a single-family house or get a condominium.

The downsides of a VA loan are that it has a one-time VA funding fee, no flexibility on federal debts and requires a clear termite report.


Low-Down-Payment Loan Programs

Low-down-payment loan programs allow Texan homebuyers to finance their home with a down payment of 3% or less. You can opt for either conventional, FHA or FHA 203(k) loans.

Fannie and Freddie (Conventional) Loans

Conventional loans, also known as Fannie and Freddie loans, have flexible requirements. Because private lenders offer them, conventional mortgages are a widely available option for Texan homebuyers.

A conventional loan may be ideal for those ineligible for a government-backed mortgage due to payment default. Depending on the lender, you can acquire a mortgage with a 3% down payment.

The two main types of conventional loans are conforming and non-conforming loans. Conforming loans follow Freddie Mac or Fannie Mae guidelines, while non-conforming loans go beyond the conforming limits.

To meet the eligibility requirements of a conventional loan, borrowers usually need a 620 credit score and a 45% debt-to-income ratio. However, it's best to compare multiple lender terms to find a suitable program.

FHA Loans

An FHA loan is a type of low-down-payment mortgage that adheres to Federal Housing Administration (FHA) policies and procedures. For borrowers with no credit history or bad credit, an FHA loan would be an excellent choice.

Since private lenders offer FHA home loans, the requirements are less strict. You can typically qualify for an FHA loan if you have a 56.9% debt-to-income ratio (maximum). You also need a minimum 500 credit score and a 3.5% down payment. It's important to know that FHA loans have a repayment term of 15 or 30 years and a fixed interest rate.

MoneyGeek's research found that Texan homebuyers have a mortgage limit of up to $420K and $538K for single-family and two-family properties, respectively. One downside is that some condominiums aren't eligible for an FHA loan. You must also pay a 1.75% fee equal to your loan amount.


FHA 203(k)

If you need a basic mortgage program and construction loan, consider looking at an FHA 203(k) loan . It's a dual-purpose program that allows homebuyers to purchase older homes to improve or modernize them.

There are two types of FHA 203(k) loans:

  • Standard 203(k): Ideal for homebuyers who need to make big renovations such as remodeling a kitchen or replacing plumbing.
  • Limited 203(k): This is also called a simplified or streamlined 203(k) loan. It is sufficient if you only need to finance cosmetic or non-structural repairs.

Generally, homebuyers must have a credit score of 500–580, a minimum 3.5% down payment and a front-end debt-to-income ratio of 31% or less. You can only qualify for an FHA 203(k) mortgage financing if you will use your newly renovated home as your primary residence.


Texas Homebuyer Programs

Aside from mortgage programs backed by the government, potential Texan homeowners can also consider state-specific homebuyer programs.

Homes for Texas Heroes

The Texas State Affordable Housing Corporation (TSAHC) has housing programs for hero professions. The Homes for Texas Heroes program will be ideal if you're a professional educator, police officer, firefighter, correction officer or health worker.

Home Sweet Texas

First-time homebuyers not working in a hero profession may be eligible for TSAHC'S Homes Sweet Texas home loan program.

If you qualify, you can apply for the Mortgage Credit Certificate (MCC) or Down Payment Assistance (DPA) program.

Veterans Land Board Housing Assistance Program

Through the Texas Veterans Land Board, eligible veterans and military members can get low-interest rate loans to purchase land, a home or home improvement.

Habitat for Humanity

Habitat Humanity Texas offers housing assistance for active participants in their homeownership journey. You must also have a low-to-moderate income for your area.

Local Housing Programs

Texas also offers first-time homebuyer programs in each city. A few examples include the housing assistance programs in the city of Dallas, Houston and El Paso.

Texas Homebuyer Program

The Texas Department of Housing and Community Affairs offers a first-time homebuyers program with a 30-year repayment term, flexible down payment and closing assistance. To qualify, you must be a first-time homebuyer, meet income and property value limits and have a minimum credit score of 620.


FAQs for First-Time Homebuyer Programs in Texas

MoneyGeek answered frequently asked questions about first-time homebuyer programs in Texas to help you determine which one is a financially sound decision.

Does Texas have any first-time homebuyer programs?
What qualifies me as a first-time homebuyer in Texas?
Can you buy a house in Texas with no down payment?
Who can help me with my down payment on a house in Texas?