How to buy a house in texas for the first-time

Buying a house is a huge financial decision. If you’ve never done it before, it’s easy to feel like you’re in over your head. Loan programs for first-time home buyers can make the process easier, especially if you’ve had credit issues or found it hard to save up a down payment.

The Texas Department of Housing and Community Affairs, or TDCHA, offers first-time home buyer programs to assist qualified borrowers in the Lone Star State. Some national loan programs also have features that can benefit first-time home buyers. Browse the options below to find the right mortgage for your needs.

National first-time home buyer loan programs

No matter where you live, these loan programs have benefits that may help you buy your first home, like low down payment and credit score requirements.

Low down payments, limited mortgage insurance premiums

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

Military, low down payments

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

Low credit score, low down payments

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

TDHCA highlights and eligibility requirements

If you haven’t owned a home as your primary residence within the past three years, you’re considered a first-time home buyer by the TDHCA. This requirement is waived if you’re an honorably discharged veteran.

• Down payment and closing cost assistance.

• Tax credit possible for annual interest paid on mortgage loan.

• Some programs can be combined for maximum benefit.

• Homes in “targeted areas” enjoy higher income and purchase price limits.

• Borrowers must have a minimum credit score of 620.

• Property must be a single-family home or a single-unit condominium.

• Some manufactured housing allowed.

TDHCA first-time home buyer loan programs

Down payment assistance, closing cost assistance

The My First Texas Home program offers 30-year, fixed-interest rate mortgages for first-time home buyers and veterans. The program includes down payment and closing cost assistance of up to 5% of the mortgage amount as a no-interest, no-monthly-payment second lien. In order to be eligible for this program, first-time home buyers have to complete a home buyer education course and provide their lender with a certificate of completion before closing. TDHCA offers a free, two-hour online course that satisfies this requirement, though HUD-approved homeownership courses are also accepted.

Although it’s technically a loan, money provided for down payments or closing costs doesn’t need to be repaid until the home is sold, refinanced or paid off. My First Texas Home loans can also be combined with the Texas Mortgage Credit Certificate program to reduce your federal tax bill.

While the My First Texas Home loan program is available throughout Texas, purchase price and income limits are higher for properties located in areas where most families earn less than 80% of the state’s median income, or “targeted areas.” Learn how to determine if a property is within a targeted area on the TDHCA website.

Down payment assistance, closing cost assistance

The My Choice Texas Home program offers conventional or government-backed 30-year fixed-rate loans and is not restricted to first-time buyers. Qualified buyers can get help with down payments and closing costs up to 5% of the loan amount. Income and purchase price limits apply, and a minimum credit score of 620 is required.

Texas mortgage credit certificate

Every mortgage payment includes interest charges that go to the lender, rather than your loan balance. First-time home buyers in Texas may be able to recoup a portion of that interest on their federal tax bill using the Texas Mortgage Credit Certificate, or MCC.

There can be annual limits on the tax credit depending on a specified percentage of mortgage interest paid. The mortgage credit certificate is valid for the lifetime of the loan, so long as the home remains your primary residence.

Summary: 2021 TDHCA first-time home buyer programs

• My First Texas Home loan for first time home buyers who want down payment and closing cost assistance, as well as low interest rates.

• My Choice Texas Home for repeat buyers who need assistance with down payment and closing costs.

• Texas mortgage credit certificate for breaks on federal income taxes.

The TDHCA doesn’t approve applications or lend money; instead, it has a network of participating lenders that provide access to first-time home buyer programs. These lenders may have additional rules about income limits, credit scores and eligible properties. If you’re interested in these home buyer assistance programs, reach out directly to a lender for more information.

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