What You Should Know About Buying a Home in Texas
Buying your first home is always daunting. But for first-time home buyers in Texas, there are plenty of places to go to get help.
The Lone Star State hosts a range of programs for first-time home buyers – from homebuyer counseling and training courses to grants and loans that can help meet your down payment and closing costs.
Some of these down payment support programs are nationwide, but others only apply to specific cities, towns, and counties. So make sure you explore your local options.
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In this article (continue to …)
Overview of real estate buyers in Texas
Home buyers in Texas have an edge over buyers in a few other areas.
The average home price in the state is lower than the rest of the country: just $ 283,200 in April 2021 compared to over $ 340,000 across the country.
However, home prices and down payments vary widely depending on where you want to buy and what your personal finances are.
Overview of Home Buyers in Texas
Average home sale price
Minimum deposit in Texas (3%)
20% deposit in Texas
Average Texas Credit Score 1
Maximum Grant for Texas Homebuyers2
$ 40,000 + in Dallas / 5% of loan amount across the country
Down payment amounts are based on the last available average home sale price in the state. A “minimum” down payment is assumed to be 3% less than a conventional mortgage with a minimum credit rating of 620.
If you are eligible for a VA loan (supported by the Department of Veterans Affairs) or a USDA loan (supported by the U.S. Department of Agriculture), you may not need a down payment at all.
Confirm eligibility to buy a house (June 7, 2021)
First Time Loans For Home Buyers In Texas
If you're a first-time buyer in Texas with a 20% down payment, you can get a conventional loan – likely with a low interest rate and no personal mortgage insurance (PMI).
If you cut 20%, you will keep your monthly mortgage payments low. It could also give you an advantage in competitive housing markets like Austin or Dallas.
However, few first-time borrowers have saved that much.
The good news is that there are a wide range of mortgage loans out there that can help buyers get into a new home with little or no down payment:
Conventional 97 – Supported by Freddie Mac or Fannie Mae. 3% down payment and at least 620 credits. You can usually stop paying mortgage insurance after a few yearsFHA loans – Supported by the Federal Housing Administration. 3.5% down and a credit score of at least 580. You keep looking for mortgage insurance until you refinance, move to another type of mortgage, or pay off your loanVA loan – For veterans and service members only. A zero deposit is required. The minimum credit score varies by lender, but is often 620. No ongoing mortgage insurance upon completion. These are arguably the best mortgages available, so check your eligibility if you have a history of military serviceUSDA loan – For low to middle income people who shop in designated rural areas. Zero deposit required. The creditworthiness requirements vary depending on the lender, but often 640. Low mortgage insurance ratesTexas State Affordable Housing Corporation Corporation loan – Special home loans for civil servants and low-income buyers. More info below
Remember, your down payment isn't the only upfront cost when buying a home. You will also need to cover the closing costs, which are often 2-5% of the home loan amount.
Down payment and exit grant programs – as detailed below – can help first-time buyers cover their up-front fees.
Also, remember that your mortgage payments include property taxes and home insurance in addition to the loan amount and interest. So take these home costs into account when assessing your budget for buying a home.
Find the best first-time buyer loan for you (June 7, 2021)
First-time home buyer programs in Texas
There are numerous sources of help for a first time home buyer in Texas. But a good place to start is Texas State Affordable Housing Corporation (TSAHC).
The TSAHC is a national public body. It can help you set up a loan and offers advice and training for first-time buyers.
The company has two major homebuyer utility programs:
Homes for Texas Heroes home loan program: Fixed-rate mortgage program for teachers, firefighters, rescue workers, police officers, law enforcement officers, and veterans
Homes Sweet Texas Home Loan Program: Fixed rate mortgage program for low and middle income homebuyers in Texas for the region or county they live in.
The income limits for both programs vary by county. However, there is an online proficiency test (click the link above) that will tell you if your application could be successful.
Once you have completed the form (there are only four questions) you will be directed to a list of local participating lenders. You need to choose one of these to get TSAHC assistance.
Borrowers must have a credit score of at least 620 to qualify for any of the programs. And there are limits to the price of a home that you can buy, although they seem pretty generous.
Help with home buying for veterans
If you are a Veteran or Service Member, please visit the Veterans Land Board Housing Assistance Program website, where you may find low-interest loans for home or property purchases.
Grants for First Time Home Buyers in Texas
If you have been approved for a home loan by the Texas State Affordable Housing Corporation, you will receive a mortgage certificate of up to $ 2,000 per year from your taxes (20% to 25% of the annual interest you pay on your mortgage). .
You can also get down payment assistance of up to 5% of the loan amount as a direct grant (never repayable) or a forgivable second mortgage.
At the end of this article is a list of more than 40 programs to help first time home buyers in Texas. But these are specific to counties, cities and municipalities. The TSAHC program is nationwide.
Each Down Payment Assistance Program (DPA) can set its own rules and offer its own benefits. You may find that the one serving your area is better or worse than TSAHC's.
Compare all the programs to which you are eligible and see which one offers the best deal.
Of course, if you are able to deposit 20% and have good credit, you may not need any homebuyer assistance at all. In this case, a standard conventional loan is probably the best and cheapest option.
Compare real estate loans (June 7, 2021)
Buy a home in the major cities of Texas
Buying a home in a big city is often more expensive than in rural areas or small towns. Competition could also be tougher in the real estate markets in large cities.
If you are planning to shop in one of Texas’s largest cities, you want to know what to expect. Here is an overview.
Houston first time home buyers Houston
The average list price for homes in Houston was $ 320,000 as of April 2021. According to Realtor.com, that was an increase of 14.3% over the previous year.
At today's property prices, a down payment in Houston, Texas could cost:
$ 9,600 – Minimum deposit of 3%$ 64,000 – Maximum deposit of 20%
The Houston City Housing and Community Development Department has two programs that can help first-time home buyers in Texas.
A DPA program is available to those with a household income of at least 80% of the median income of the area and offers up to $ 30,000.
The website says, “Our help is an interest-free, forgivable loan backed by a lien. The loan is fulfilled when the buyer lives in the apartment for five years. If the buyer sells or moves out of the home before five years have elapsed, they will pay back part of the original loan amount to the city.
The other program is similar but specifically designed to help home buyers who have not owned a home in the past three years or who are "replacing a home damaged by Hurricane Harvey."
First time home buyer in San Antonio
The average list price for homes in San Antonio as of April 2021 was $ 250,000. That was a 7.8% year-over-year increase, according to Realtor.com.
Given today's house prices in San Antonio, a down payment would cost approximately:
$ 7,500 – Minimum deposit of 3%$ 50,000 – Maximum deposit of 20%
The The Neighborhood & Housing Services Department (NHSD) has a Homeownership Incentive Program (HIP 80) that awards between $ 1,000 and $ 15,000 to help first-time home buyers with their upfront housing costs.
IIn the words of the NHSD website, the support comes in the form of a “0% interest / no payment second loan that can be used for the down payment required by your lender and some of the additional costs associated with buying a home. The loan is repaid 100% over a period of 5 years.”
San Antonio also has two other deposit support programs; one for first responders and one for employees.
Dallas first time home buyers
The average list price for homes in Dallas as of April 2021 was $ 418,700. According to Realtor.com, that was an increase of 11.7% over the previous year.
At today's property prices, a down payment in Dallas can cost:
$ 12,560 – Minimum deposit of 3%$ 83,740 – Maximum deposit of 20%
The city of Dallas has three deposit support programs. The amount you will receive depends on your needs and is capped at $ 40,000 in most areas.
To qualify for Dallas Homebuyer Assistance, you must have a household income no greater than 80% of the median area income.
The website says: "The assistance is a second lien as a forgivable deferred loan. The loan terms are interest-free without monthly payments, which are calculated annually on a pro rata basis based on the affordability period (length of residence of the loan). A partial repayment is due in the event of the sale, lease, transfer or other disposal of the property.”
This is more obscure than Austin and San Antonio deals, but you can call (214) 670-3644 to get a clearer idea of what is on offer. Or talk to your loan officer about what local help you might be eligible for.
Where can I find help buying a home in Texas
All of the organizations listed above should provide free advice to any first-time Texas home buyer.
In addition to our selections, the US Department of Housing and Urban Development (HUD) offers a list of city- and county-specific programs across Texas. The list is as follows:
TX Home Buyer Resources by City / Town
TX Home Buyer Resources by County
What are the mortgage rates in Texas today?
You can check current Texas mortgage rates here.
Or, you can speak to a lender directly for the rates tailored to your situation.
If you choose to use any of the assistance programs listed above, you can choose an approved lender from that agency's list. This lender will assign you a loan officer to help you through the rest of the home buying process.
If you go the traditional route – with no homebuyer assistance – you can choose between a national or local mortgage lender.
Either way, it is recommended that you apply to at least 3-5 lenders to ensure you are getting the lowest mortgage rate available.
Price quotes can sometimes vary by as much as 0.50% between lenders, so you can save on a package for your new home when shopping for prices.
Confirm your new price (June 7th, 2021)
1 Source: Experian.com 2021 study on 2020 data
2Based on a review of available state DPA grants at the time of this writing