Buying your first home can be a little daunting. It’s a huge financial decision and a serious financial investment. This process can be made even harder for those struggling with other financial burdens or anyone having trouble saving up a big down payment.
Thankfully, the Texas Department of Housing and Community Affairs (TDCHA), offers first time home buying programs and returning home buyer program options to assist qualified borrowers in Houston and other parts of Texas. For first time home buyers in Houston, TX, there are national, state, and city-based options that can help you purchase your first home.
National Loans for First Time Homeowners
These are the loan options that are generally available no matter where you live, and come with some benefits that can help you buy a new home, like low down payment and credit score requirements.
A conventional mortgage is pretty well known for not needing a huge down payment and limited mortgage insurance premiums. With a conventional mortgage loan, first time home buyers in Houston can get a mortgage loan with a little as 3% down. If you can manage to put at least 20% down, you won’t need to pay mortgage insurance on top of that. The minimum credit score usually required for these loans is about 620 to qualify, but those numbers can change a little by lender and region.
Federal Housing Administration Loans
An FHA loan is a great option for those who can only afford small down payments who also have low credit scores. They offer more relaxed loan qualification requirements. You can qualify for an FHA loan in Houston with a credit score as low as 500 if you can put down at least 10%. With 580 and higher credit scores, your down payment could wind up as low at 3.5%, but all FHA loans require mortgage insurance, which is a non-negotiable requirement and can’t be canceled.
Veteran Affairs (VA) Loans
VA loans are guaranteed by the U.S. Department of Veteran Affairs and are meant to help aid military members, veterans, and surviving spouses get affordable housing. If you qualify, this particular program can come with some awesome benefits, like no minimum credit score, or they might waive the mortgage insurance, or you may no have to make a down payment. Although you’ll likely have to pay a VA funding fee.
The USDA home loan program encourages people to seek suburban and rural home ownership. These loans offer zero down payment mortgages to low income home buyers. Borrowers with nontraditional credit data (rent or utility payments) can still apply, although applicants with a score of 640 or above will experience faster loan processing. And while these loans come with area restrictions, you don’t have to be a rancher or farmer to qualify for a USDA mortgage.
Texas First Time Home Owner Loan Programs
Thankfully, the Texas Department of Housing and Community Affairs (TDHCA) considers you a first time home buyer as long as you haven’t owner a home (or primary residence) within the last 3 years. And if you’re an honorably discharged veteran.
Some noteworthy perks of TDHCA loan perks include:
- Down payment assistance
- Closing cost assistance
- Competitive interest rates
- Tax credit possible for annual mortgage interest paid
- Homes in “targeted areas” benefit from higher income and purchase price limits, as well as no first time buyer restriction (meaning seasoned property owners can shop as well)
And the basic qualifications for most of these loans are:
- A minimum credit score of 620
- You must meet TDHCA’s income and loan requirements
- Property being purchased must be located in Texas and meet purchase price restrictions
- Property must also be a single-family home or single-unit condominium
- Some multi-plexes and manufactured housing is allowed
My First Texas Home Loan
This program offers a 30 year, low, fixed rate interest mortgage for first time homebuyers through a network of participating lenders. Through this program, you can get down payment assistance and closing cost assistance of up to 5% o the mortgage value as a no interest, no monthly payment second lien.
The My First Texas Home loan program is available throughout Texas, although 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, aka “targeted areas.” Learn how to determine if a property is within a targeted area on the TDHCA website.
Texas Mortgage Credit Certificate
A Texas MCC loan makes it so first time home buyers in Texas get a chance to recuperate a portion of the interest they pay lenders throughout the year, since what they pay towards interest doesn’t actually pay own your loan balance. This tax credit usually includes 40% of your annual mortgage interest, up to $2,000/year, and the credit is valid for the lifetime of your loan so long as your home remains your primary residence.
Houston First Time Home Buyer Loan Programs
Houston’s Housing and Community Development Department (HCDD) offers and services Houston’s Homebuyer Assistance Program (HAP) for eligible low to moderate income families. These funds may be used to assist an approved applicant in paying their down payment, closing costs, and principal buydown.
Homebuyer Assistance Program
In order to qualify for the Homebuyer Assistance Program in Houston, you must:
- Be a first time homebuyer or have not owned a home in the last 3 years
- Must not have more than $15,000 in liquid assets prior to closing (deferred assets like 401ks and pensions aren’t included)
- The buyer and co-owner must be U.S. citizens or permanent resident aliens
- Buyers must be able to obtain a fixed rate mortgage – Adjustable rate mortgages and seller-financed mortgages are not accepted
- Combined household income must be at or below the HCDD’s income limits (Income includes any payments from employment, child support, recurring gifts, etc.)
Homebuyer Assistance Program Guidelines
- An eligible homebuyer at or below 80% AMI (Annual Minimum Income) limits may receive $30,000 in assistance
- The selected home must be located within the property tax jurisdiction of the City of Houston
- Eligible property types include single-family homes, duplexes, triplexes or quadruplexes, attached townhomes, condominiums, or cooperative units
- Each applicant must take an eight-hour Homebuyer Education Course through an approved HUD counseling agency
- Applicants must occupy the home as their principal residence for a minimum of five years
- The back-end ratio cannot exceed 45%
- Property must pass an environmental and inspection review
- The borrower(s) cannot be delinquent on any student loans, federal income taxes, as well as state and local taxing authorities, utility payments, or City services
Finding the Right Program for You
Buying a home can be tricky, especially for first time homebuyers. The Texas Mortgage Pros are here to help new home buyers in Houston and the surrounding Houston, TX area. For additional information regarding the loan services we offer, please contact our Home Loan Specialists at (866) 772-3802 and get one step closer to owning your first home.