Key takeaways 

• The My First Texas Home program offers closing cost and down payment assistance to first-time home buyers. 
• A tax credit is available to first-time home buyers through the Texas Mortgage Credit Certificate program. 
• Home buyers can secure low down payments and interest rates through first time home buyer grants and national programs. 

Purchasing your first home may feel confusing as you navigate how much down payment is required, what credit score is needed, and whether income limitations apply. At the same time, first-time home buyers are in a unique position to take advantage of programs that aren’t available to traditional borrowers. These payment assistance programs feature lower down payments, assistance with closing costs, and many other benefits. 

You should be aware of financing basics for first-time homebuyers and use that knowledge to narrow down your options. Understanding the options available to you as a Texas first time home buyer makes the process easier and helps get you into your new home faster. 

Here is a list of the best Texas first time home buyer programs:

My First Texas Home program

The My First Texas Home program is open to first-time home buyers, all veterans, and other borrowers who haven’t owned a home in the past three years. It includes a 30-year, fixed-interest loan, which means that your monthly payment won’t go up in the future. The loan program is available through local participating lenders. 

One of the major benefits of this program is that it provides down payment and closing cost assistance up to 5% of the purchase price. For example, let’s say that you find a home priced at $250,000. Up to $12,500 is available to cover the down payment and closing costs. The payment assistance program is available through a variety of formats, including FHA, VA, USDA, and conventional loans. 

The My First Texas Home program may be combined with the Texas Mortgage Credit Certificate program to reduce federal tax liability. Income and purchase price restrictions may apply, and a credit score of 620 or higher is needed to qualify. 

My Choice Texas Home program

The My Choice Texas Home (MCTH) program is available to all home buyers and offers down payment assistance up to 5% of the purchase price. The program is available in the state of Texas through participating networks. A variety of government-backed loans—such as FHA, VA, and USDA—and conventional loans are available through the program. 

Income limits and purchase price limits may apply, and a minimum credit score of 620 is required. The MCTH program cannot be combined with the Texas Mortgage Credit Certificate program. 

Texas Mortgage Credit Certificate program 

The Texas Mortgage Credit Certificate program offers additional savings for first-time home buyers on their federal taxes. The program reduces the borrower’s tax bill as long as they continue living in the home. For example, if you decide to rent your home in the future, you will no longer qualify for the tax benefit. 

There is no credit score requirement, and the program is available through local participating lenders. First-time home buyers can combine this assistance program with a My First Texas Home mortgage loan. Requirements include: 

• Borrower must be a first-time home buyer, a veteran, or a Texas resident who has not owned a home within the past three years. 
• Income limits may apply.
• Purchase price limits may apply. 
• Home buyers must complete a pre-purchase home buyer education course prior to closing. 

Local programs offer many advantages and perks, but it’s also important to note that federal programs are available to first-time home buyers in the state of Texas. Understanding your options can help you select the right mortgage for your circumstances. 

Conventional mortgage programs 

Conventional loan programs allow for down payments as low as 3%. A credit score of 620 or higher is required. The higher your credit score, the lower the interest rate you can secure. This will help drive down your monthly payments and total interest owed. 

If you can afford to put 20% down on your new home, PMI is waived. Not paying PMI will save you a significant amount of money over the life of your loan. There are very few mortgage programs that do not require PMI for lower down payments. One of them is Veterans Affairs (VA) loans. 

VA loan programs 

VA loans are a good option for first-time home buyers if they meet requirements. These loans are guaranteed by the U.S. Department of Veterans Affairs. To qualify, you must be an active military member, veteran, or surviving spouse. 

There is no down payment or credit requirement for VA loans. A first-time home buyer could buy a home with $0 down and poor credit history. No private mortgage insurance is required, which saves borrowers thousands of dollars over the life of the home loan. 

FHA loan programs 

FHA loans are a popular choice for first-time home buyers due to low down payment and lenient credit requirements. Credit score requirements are as low as 500 with a 10% down payment. For example, in this scenario, a borrower purchasing a $200,000 home would need a $20,000 down payment. 

A credit score of 580 or higher would need only a 3.5% down payment. This would reduce the required down payment amount to $7,000. FHA loans require PMI if a borrower puts down less than 20% on a new home purchase. 

USDA loans 

USDA loans aren’t widely used and are a good option for first-time home buyers purchasing in qualifying parts of Texas. The assistance program is designed to encourage rural and suburban ownership and allows you to put 0% down on a home purchase. 

The loan program has low-interest rates that help keep your monthly payment lower. PMI requirements are different from those for conventional loans. The USDA charges two fees if you put less than 20% down on the purchase. 

The first is an upfront “guarantee fee” that is paid at closing. The second is an annual fee that is included in the monthly mortgage payment amount. The upfront fee is 1% of the total financed amount and the annual fee is 0.35% of the loan’s current balance. 

For example, let’s say that you’re financing a $200,000 purchase. You decide to put 0% down and pay the upfront fee of $2,000 (1% of the purchase price). The annual fee (0.35% of the loan amount) breaks down to about $58 per month.  

The USDA loan has a credit score requirement of at least 640 and has income limitations, including the following:

• 1-to-4-member household, $90,300
• 5-to-8-member household, $119,200

This home loan option is good for first-time home buyers who don’t have a large amount of money saved for the down payment and who have a relatively low annual income. 

Moving forward with success 

Purchasing your first home is a large decision, and you have access to many programs that aren’t available to all buyers. The key is to understand all of your options and start asking some important questions. For example: How much can I afford to put down? How much can I afford to pay monthly? And do I qualify for local programs that help offset these costs? By asking important questions upfront, you can narrow down your options and get into your home faster and with less out-of-pocket expenses.