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I am always excited to meet and be able to help first time home buyers! I was once on the same boat and I must say that the homebuying process could indeed be a very overwhelming experience. First time homebuyers can get all the help that they need most especially in obtaining financing. I wanted to share this wonderful and excellent resource from Nerdwallet that talks about first time home buyer loan programs both on national and state levels. There is definitely assistance out there so please read on and find out if you can benefit from this wide variety of options to help you get into a home that you will love!
Buying a house is a huge financial decision. If you’ve never done it before, it’s easy to feel like you’re in over your head. Loan programs for first-time home buyers can make the process easier, especially if you’ve had credit issues or found it hard to save up a down payment.
The Texas Department of Housing and Community Affairs, or TDCHA, offers first-time home buyer programs to assist qualified borrowers in the Lone Star State. Some national loan programs also have features that can benefit first-time home buyers. Browse the options below to find the right mortgage for your needs.
>>National first-time home buyer loan programs
No matter where you live, these loan programs have benefits that may help you buy your first home, like low down payment and credit score requirements.
Limited mortgage insurance premiums
First-time home buyers can get a conventional home loan with as little as 3% down if the mortgage meets requirements set by Fannie Mae and Freddie Mac. And if you put at least 20% down, you won’t have to pay mortgage insurance. Most lenders require a minimum credit score of 620 to qualify for a conventional mortgage, but a score around 740 earns you the best interest rates.
Mortgages insured by the Federal Housing Administration, or FHA, offer relaxed qualification requirements, especially when it comes to down payment and credit score. You can qualify for an FHA home loan with a credit score as low as 500, but you’ll need a 10% down payment. If your score is 580 or higher, your down payment could be as low as 3.5%. All FHA loans require mortgage insurance, which cannot be canceled.
Guaranteed by the U.S. Department of Veterans Affairs, these mortgages are available to military members, veterans and surviving spouses. If you qualify, you’ll see benefits such as no minimum credit score and no down payment or mortgage insurance, but you'll likely have to pay a VA funding fee.
The USDA home loan program encourages rural and suburban homeownership by offering zero-down-payment mortgages to lower-income buyers. Borrowers with nontraditional credit data, like rent or utility payments, can still apply, but those with a score of 640 or above will experience faster loan processing. These mortgages can be used only in certain areas, but you don’t have to be a farmer or rancher to qualify.
TDHCA highlights and eligibility requirements
If you haven’t owned a home as your primary residence within the past three years, you’re considered a first-time home buyer by the TDHCA. This requirement is waived if you’re an honorably discharged veteran.
- Down payment and closing cost assistance.
- Tax credit possible for annual interest paid on mortgage loan.
- Some programs can be combined for maximum benefit.
- Homes in “targeted areas” enjoy higher income and purchase price limits.
- Borrowers must have a minimum credit score of 620.
- Borrowers must meet income and loan requirements.
- Property must be located in Texas and not exceed purchase price limits.
- Property must be a single-family home or a single-unit condominium.
- Some manufactured housing allowed.
>>TDHCA first-time home buyer loan programs (State Programs)
My First Texas Home loan
The My First Texas Home program offers 30-year, fixed-interest rate mortgages for first-time home buyers and veterans. The program includes down payment and closing cost assistance of up to 5% of the mortgage amount as a no-interest, no-monthly-payment second lien. In order to be eligible for this program, first-time home buyers have to complete a home buyer education course and provide their lender with a certificate of completion before closing. TDHCA offers a free, two-hour online course that satisfies this requirement, though HUD-approved homeownership courses are also accepted. Although it’s technically a loan, money provided for down payments or closing costs doesn’t need to be repaid until the home is sold, refinanced or paid off. My First Texas Home loans can also be combined with the Texas Mortgage Credit Certificate program to reduce your federal tax bill.
While the My First Texas Home loan program is available throughout Texas, 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, or “targeted areas.” Learn how to determine if a property is within a targeted area on the TDHCA website.
My Choice Texas Home
The My Choice Texas Home program offers conventional or government-backed 30-year fixed-rate loans and is not restricted to first-time buyers. Qualified buyers can get help with down payments and closing costs up to 5% of the loan amount. Income and purchase price limits apply, and a minimum credit score of 620 is required.
Texas mortgage credit certificate
Every mortgage payment includes interest charges that go to the lender, rather than your loan balance. First-time home buyers in Texas may be able to recoup a portion of that interest on their federal tax bill using the Texas Mortgage Credit Certificate, or MCC. There can be annual limits on the tax credit depending on a specified percentage of mortgage interest paid. The mortgage credit certificate is valid for the lifetime of the loan, so long as the home remains your primary residence.
Summary: 2021 TDHCA first-time home buyer programs
- My First Texas Home loan for first time home buyers who want down payment and closing cost assistance, as well as low interest rates.
- My Choice Texas Home for repeat buyers who need assistance with down payment and closing costs.
- Texas mortgage credit certificate for breaks on federal income taxes.