Texas has first-time homebuyer programs that combine a 30-year fixed-rate mortgage, down payment and closing cost assistance worth 2% to 5% of the loan amount, and a federal tax credit of up to $2,000 a year for as long as you own the home. Two state agencies run them: the Texas Department of Housing and Community Affairs (TDHCA) and the Texas State Affordable Housing Corporation (TSAHC). You qualify by meeting county-specific income and purchase price limits, hitting a minimum credit score, and finishing an approved homebuyer education course.
The Programs You Can Apply For
TDHCA’s My First Texas Home is the main first-time buyer program. It’s open to anyone who hasn’t owned a primary residence in the past three years and pairs an FHA, VA, or USDA 30-year fixed-rate mortgage with 2%–5% down payment assistance.1Texas Department of Housing and Community Affairs (TDHCA). My First Texas Home Program Matrix
TSAHC runs two parallel programs. Homes for Texas Heroes is for public-service workers: teachers, teacher aides, school librarians, counselors, and school nurses; peace officers and public security officers; firefighters, EMTs, emergency care attendants, and licensed paramedics; corrections officers, juvenile corrections officers, and county jailers; and veterans and active-duty service members.2Texas State Affordable Housing Corporation. Who Qualifies for the Homes for Texas Heroes Program Home Sweet Texas covers low-to-moderate-income households that don’t fit those categories. Both offer the same choice between a grant that never has to be repaid and a forgivable second lien.
One boundary worth knowing: you don’t actually need to be a first-time buyer to use state assistance. TDHCA’s My Choice Texas Home offers the same down payment help and loan terms to repeat buyers.3Texas Department of Housing and Community Affairs (TDHCA). The Texas Homebuyers Program
How the Down Payment Assistance Works
TDHCA’s assistance comes as a second lien at 0% interest, with two structures to pick from:
- 30-year deferred repayable. No monthly payment. The full balance comes due when you sell, refinance, transfer the home, or pay off the first mortgage. Voluntary payments are allowed at any time with no penalty.
- 3-year forgivable. The whole balance is forgiven after 36 months if you stay current on the first mortgage and keep the property as your primary residence. Sell or refinance before three years is up and you owe it all back.
Neither option has prepayment penalties beyond standard recording fees.4Texas Department of Housing and Community Affairs. Lender Guide TSAHC’s forgivable second lien works the same way and has the same refinance trigger.5Texas State Affordable Housing Corporation. Home Buyer FAQ: What Are the Benefits of TSAHC’s Forgivable Second Lien DPA
The Mortgage Credit Certificate
Both agencies also administer a Mortgage Credit Certificate (MCC), and this is the benefit people most often miss. An MCC lets you claim 15% of the mortgage interest you pay each year as a direct federal tax credit, up to $2,000 annually, for the entire life of your mortgage.6Texas Department of Housing and Community Affairs. Texas Mortgage Credit Certificate Fact Sheet The $2,000 cap is set by federal law and applies whenever the certificate credit rate is above 20%.7Office of the Law Revision Counsel. 26 USC 25 – Interest on Certain Home Mortgages
You claim the credit on IRS Form 8396 with your annual return, using your certified indebtedness amount, the credit rate from your MCC, and your mortgage interest for the year (typically from Form 1098). If you also itemize, the mortgage interest deduction on your Schedule A has to be reduced by whatever amount you take as a credit on Form 8396.8Internal Revenue Service. Form 8396 – Mortgage Interest Credit
Through TSAHC, the MCC is only available bundled with their DPA or no-DPA loan program. The standalone MCC option is discontinued indefinitely.9Texas State Affordable Housing Corporation. Home Buyer FAQ: Can I Combine a Mortgage Credit Certificate with Down Payment Assistance For most buyers that works out fine, because stacking the MCC with DPA produces the biggest combined savings.
Who Qualifies
Income Limits
Both agencies cap household income by county, family size, and whether the property sits in a designated targeted census tract. Under TDHCA’s programs, a one- or two-person household can earn roughly $98,800 in smaller metros up to $143,900 in higher-cost counties like Kendall. Households of three or more go higher, exceeding $187,000 in parts of the Austin-Round Rock area.10Texas Department of Housing and Community Affairs (TDHCA). TDHCA Income and Purchase Price Limits Everyone in the household over 18 counts toward the total, not just whoever is on the mortgage.
Credit Score and Debt-to-Income
For FHA, VA, or USDA loans through TSAHC, the minimum FICO is 620. Scores of 620–639 pay an added 0.50% origination fee. Conventional loans need at least 640 to use the forgivable second-lien DPA. If you get an automated underwriting approval there’s no hard cap on your debt-to-income ratio; with manual underwriting you need a 640 minimum and DTI capped at 43%.11Texas State Affordable Housing Corporation. Home Buyer FAQ: Are There Credit and Debt Requirements
Purchase Price Limits
Most Texas counties carry a TDHCA purchase price limit of at least $544,232 for a single-family home. Dallas and Fort Worth top out at $585,006, Austin-Round Rock at $593,363, and San Antonio at $579,037. In designated targeted areas the ceilings run higher: $725,222 in the Austin area and $715,007 in Dallas–Fort Worth.10Texas Department of Housing and Community Affairs (TDHCA). TDHCA Income and Purchase Price Limits
Homebuyer Education
You have to finish an approved homebuyer education course before closing. TDHCA recommends its “Finally Home!” course and accepts certificates from HUD-certified providers, Freddie Mac’s CreditSmart, and Fannie Mae’s HomeView.12Texas Department of Housing and Community Affairs (TDHCA). Texas Statewide Homebuyer Education Program TSAHC has the same requirement.13Texas State Affordable Housing Corporation. Find a Lender
What Properties Qualify
You aren’t limited to a traditional single-family house. TDHCA’s programs also cover duplexes where you live in one unit, FHA-approved condominiums, and FHA-approved manufactured homes.14Texas Department of Housing and Community Affairs (TDHCA). Programs at a Glance The property must be your primary residence. Investment properties and vacation homes don’t qualify.
How to Apply
Start by picking a lender approved to work with the program you want. TDHCA and TSAHC both post approved lender lists, and TSAHC flags certain loan officers as “Preferred” based on experience with the programs.13Texas State Affordable Housing Corporation. Find a Lender A lender who already runs these loans will handle the state portal, disclosures, and timing more smoothly than a generalist.
Expect to provide the last two years of federal tax returns and W-2s, pay stubs covering the most recent 30 days, and standard financial documentation. After pre-qualifying you, the lender reserves your assistance funds through the state’s online portal. That reservation holds the money while the mortgage goes through underwriting, which usually takes 30 to 45 days. When the loan gets final approval, the agency transfers the assistance funds directly to the closing agent, and the DPA shows up at closing as a credit against your down payment and closing costs.4Texas Department of Housing and Community Affairs. Lender Guide
What Happens If You Sell or Refinance
If you took the 30-year deferred repayable DPA, the full balance comes due when you sell, refinance, transfer the home, or pay off the first mortgage.1Texas Department of Housing and Community Affairs (TDHCA). My First Texas Home Program Matrix If you took the 3-year forgivable option and stay current for 36 months, the balance disappears. Leave early and you owe every dollar back.
There’s one rule that catches a lot of homeowners by surprise. TDHCA will not subordinate its second lien. If you refinance your first mortgage for a better rate, you have to repay the DPA in full at or before closing on the new loan, and re-subordination is explicitly prohibited.4Texas Department of Housing and Community Affairs. Lender Guide Run the math before refinancing.
If you received a Mortgage Credit Certificate or financed through a Mortgage Revenue Bond program, selling within the first nine years can trigger a federal recapture tax. You file IRS Form 8828 when all three apply: you sold the home, your original loan closed after December 31, 1990, and you received a federal mortgage subsidy such as an MCC.15Internal Revenue Service. Instructions for Form 8828 – Recapture of Federal Mortgage Subsidy The recapture is calculated from 6.25% of the highest outstanding federally subsidized loan balance, adjusted by how long you held the home and whether your income has risen above set thresholds. TDHCA has said its staff cannot calculate the exact recapture amount for you, so bring in a tax professional if you’re selling within that nine-year window.16Texas Department of Housing and Community Affairs. Understanding Recapture Tax Refinancing by itself doesn’t trigger recapture, but refinancing in the first four years adjusts your holding period as if the original loan were fully repaid on the refinance date, which can change the calculation if you later sell inside the nine-year window.