What to know about buying a house in Texas
Buying your first home is always daunting. But first-time home buyers in Texas have plenty of places to turn for help. The Lone Star State is home to a range of first-time home buyer programs — from advice and homebuyer education courses to grants and loans that can help you cover your down payment and closing costs.
Some of these down payment assistance programs are statewide, but others are for particular cities, towns, and counties. So make sure you explore your local options.
In this article (Skip to…)
- Texas home buyer overview
- Home loan options
- TX home buyer programs
- First-time buyer grants
- Buying in Texas’ cities
- TX mortgage rates
Texas home buyer overview
The median list price for homes in Texas was $345,000 in the third quarter of 2022. That was up 11.3% year-over-year, according to Texas Realtors.
Saving enough to purchase a home is a big challenge for many first-time home buyers. Thankfully, The Lone Star State offers special mortgage loans, tax credits, and down payment assistance.
Keep in mind that home prices and down payments can vary a lot depending on your target areas and what your personal finances look like.
Texas home buyer stats
|Average Home Sale Price in TX1||$345,000|
|Minimum Down Payment in TX (3%)||$10,350|
|20% Down Payment in TX||$69,000|
|Average Credit Score in TX2||692|
|Maximum TX Home Buyer Grant3||$40,000+ in Dallas or 5% of the loan amount statewide|
Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.
If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.
First-time home buyer loans in Texas
If you’re a first-time buyer in Texas with a 20% down payment, you can get a conventional loan with a competitive interest rate and no private mortgage insurance (PMI). Putting 20% down will keep your monthly mortgage payments low. It might also give you an edge in competitive housing markets like Austin or Dallas.
However, few first-time borrowers have saved that much. The good news is that Texans have access to a wide range of mortgage loans that can help them get into a new house with low or even no down payment:
- Conventional 97: Backed by Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
- FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. You’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan
- VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so check your eligibility if you have a military service history
- USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by mortgage lender but often 640. Low mortgage insurance rates
- Texas State Affordable Housing Corporation loans: Special home loans for public servants and low-income buyers. More info below
Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.
In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.
If you’re unsure which program to choose for your first mortgage, your lender or real estate agent can help you find the right match based on your finances and home buying goals.
Texas first-time home buyer programs
There are numerous sources of help for first-time home buyers in Texas. Start by checking out the Texas State Affordable Housing Corporation (TSAHC) and the Texas Department of Housing and Community Affairs (TDHCA).
Texas State Affordable Housing Corporation (TSAHC) programs
The TSAHC is a public body that operates statewide. It can help you set up a loan and provide advice and first-time buyer education courses. The corporation has two major home buyer assistance programs.
TSAHC Home Sweet Home Loan Program
This comes with up to 5% down payment assistance in the form of a grant or a zero-interest second mortgage. If you opt for assistance as a second mortgage, there are no monthly payments and the balance is forgiven after three years, unless you sell or refinance before then.
TSAHC Homes for Texas Heroes Loan Program
The Homes for Texas Heroes Home Loan Program offers 30-year fixed-rate mortgage loans to public service professionals, including teachers, firefighters, EMS personnel, police officers, correctional officers, and veterans. You don’t need to be a first-time home buyer to qualify; anyone is welcome to apply.
Similar to the above TSAHC program, this loan also comes with up to 5% down payment assistance as either a grant or a zero-interest second mortgage.
TSAHC eligibility requirements
Borrowers need a credit score of at least 620 to qualify for either TSAHC program. There are also home purchase price limits, although those seem fairly generous.
Income limits for both programs vary by county. But there’s an online eligibility test (click the applicable link above) that will tell you whether your application might succeed. Once you’ve gone through the form (it’s only four questions), you’re directed to a list of local participating lenders. You have to choose one of those to get TSAHC assistance.
Texas Department of Housing and Community Affairs (TDHCA) programs
The TDHCA helps moderate- and low-income families achieve homeownership in Texas. For qualified buyers, the TDHC offers two programs: My First Texas Home program and the My Choice Texas Home loan.
You can pair either of these programs with the Texas Mortgage Credit Certificate (MCC) which provides tax credits for interest paid on mortgage loans.
TDHC My First Texas Home program
TDHC offers first-time home buyers in Texas a 30-year fixed-rate mortgage loan with a below-market interest rate. FHA, VA, and USDA loans are all eligible through this program. You may also qualify for down payment and closing cost assistance of up to 5% of the loan amount. This is a no-interest deferred loan that must be paid in full when the homeowner refinances, sells, or pays off the mortgage.
TDHC My Choice Texas Home program
Borrowers who are interested in a conventional loan can use My Choice Texas Home. In addition to government-backed loans, this home buying program allows financing through a Fannie Mae HFA Preferred conventional loan. It also provides down payment and closing cost assistance up to 5% of the loan amount. And the program is not restricted to first-time buyers.
TDHC eligibility requirements
TDHC considers buyers who haven’t owned a home as their primary residence in the past three years to be “first-time buyers.” And for Texans who are honorably discharged veterans, the primary residence guideline is waived.
To be eligible for TDHCA loans, most Texans need to meet these requirements:
- Minimum credit score of 620
- Must conform to income and purchase price limits (vary by program and location)
- Must purchase a single-family property or single-unit condo
- Property must be a primary residence
Some of the benefits of TDHCA loans include:
- Down payment and closing cost assistance
- Mortgage tax credits
- Higher income and purchase price limits for homes in the program’s target areas
- Some manufactured homes are eligible
Home buying help for veterans in Texas
If you’re a veteran or service member, visit the Veterans Land Board Housing Assistance Program website, which says it might provide you with low-interest loans to buy a home or land.
Texas first-time home buyer grants
If you’re approved for a home loan through the Texas State Affordable Housing Corporation, you stand to receive a mortgage credit certificate worth up to $2,000 a year off your taxes (20% to 25% of the yearly interest you pay on your mortgage).
You could also receive down payment assistance of up to 5% of the loan amount as an outright grant (which never needs to be repaid) or a forgivable second mortgage.
At the end of this article, you’ll find a list of more than 40 programs that provide help for first-time home buyers in Texas. But these are specific to counties, cities, and towns. The TSAHC program is statewide.
Each down payment assistance program (DPA) can set its own rules and offer its own benefits. You may find the one serving your area is better or worse than TSAHC’s. So be sure to compare all the programs for which you’re eligible and see which offers the best deal.
Of course, if you’re able to put 20% down and have good credit, you might not need home buyer assistance at all. In this case, a standard conventional loan is likely your best and most affordable option.
Buying a home in Texas’s major cities
Buying a home in a major city is often more expensive than in rural areas or small towns. The competition might be hotter in metro real estate markets, too. If you’re planning to buy in one of Texas’s biggest cities, you’ll want to know what to expect. Here’s an overview.
Houston first-time home buyers
The median listing price for homes in Houston was $345,000 in November 2022. That was up 3% year-over-year, according to Realtor.com.
At today’s home prices, making a down payment in Houston, Texas might cost:
- $10,350 for 3% down payment
- $69,000 for 20% down payment
The City of Houston Housing and Community Development offers two programs that can help first-time home buyers.
One DPA program is available to those with a household income at or below 80% of the area’s median income andcan offer up to $30,000. Its website says: “Our assistance is a no-interest, forgivable loan secured by a lien. The loan is fulfilled if the buyer lives in the home for five years. If the buyer sells or moves out of the home before the end of five years, they will pay back the City for a portion of the original loan amount.”
The other program is similar, but may specifically help home buyers who haven’t owned real estate in the last three years or who “are replacing a home that was damaged by Hurricane Harvey.”
San Antonio first-time home buyers
The median listing price for homes in San Antonio was $300,000 in November 2022. That was up 7.1% year-over-year, according to Realtor.com.
At today’s home prices in San Antonio, a down payment would cost around:
- $9,000 for 3% down payment
- $60,000 for 20% down payment
The Neighborhood & Housing Services Department (NHSD) has a Homeownership Incentive Program (HIP 80), which lends between $1,000 and $30,000 to help first-time home buyers with their upfront housing costs.
In the words of the NHSD website, assistance is in the form of a “0% interest / no payments second loan which can be used for the down payment required by your lender and some of the additional costs associated with purchasing a home.” On balances less than $15,000, all of the loan will be forgiven over a 5-year period. However, that period of time extends to 10 years on balances greater than $15,001.
San Antonio has two other down payment assistance programs, too; one for first responders and another for employees.
Dallas first-time home buyers
The median listing price for homes in Dallas was $439,900 in November 2022. That was an increase of 10.3% year-over-year, according to Realtor.com.
At today’s home prices, a down payment in Dallas might cost:
- $13,200 for 3% down payment
- $88,000 for 20% down payment
The City of Dallas has two down payment assistance programs. The amount you get depends on your needs and in most areas is capped at $40,000. To qualify for home buyer aid in Dallas, you must have a household income that’s no higher than 80% of the area’s median income.
The website says, “The assistance is a second lien as a forgivable deferred loan. Loan terms are interest-free with no monthly payments, prorated annually based on the affordability period (residency term of the loan). Partial repayment is due upon sale, lease, transfer or other disposition of the property.”
That’s more vague than Austin and San Antonio’s offerings, but you can call (214) 670-3644 to get a clearer idea of what’s offered. Or, talk to your loan officer about what local aid you might qualify for.
Where to find home buying help in Texas
All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Texas. In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a list of city- and county-specific programs across Texas. The list is as follows:
TX first-time home buyer resources by city/town
TX first-time home buyer resources by county
What are today’s mortgage rates in Texas?
You can check current mortgage interest rates in Texas here. Experiment with a mortgage calculator to see how down payment, interest rates, homeowners insurance, and property taxes will all affect your monthly mortgage payment.
When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders. Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. Because that’s the only way to know you’re getting the best deal possible on your new home loan.
1Source: Texas REALTORS Texas Quarterly Housing Report
2Source: Experian.com 2022 study of 2021 and 2020 data
3Based on a review of the state’s available DPA grants at the time this was written