TSAHC Programs for First-Time Home Buyers in Texas: Down Payment Assistance and More
Updated: 3 days ago
Buying your first home is exciting, but coming up with the money for the down payment and closing costs can sometimes feel like the biggest obstacle. Fortunately, Texas home buyers may have access to programs designed to make purchasing a home more affordable.
One option worth exploring is the Texas State Affordable Housing Corporation (TSAHC), which offers homeownership programs that can provide eligible buyers with down payment assistance and other benefits.
And here’s something many buyers don’t realize: you don’t necessarily have to be a first-time home buyer to qualify for TSAHC down payment assistance.
What Is TSAHC?
The Texas State Affordable Housing Corporation, commonly called TSAHC, is a statewide organization that offers homeownership programs for eligible Texas home buyers.
Two of its primary programs are:
Home Sweet Texas Home Loan Program
This program is designed to help eligible low- and moderate-income Texas home buyers.
Homes for Texas Heroes Home Loan Program
This program provides assistance for certain eligible professions, including teachers, veterans, police and correctional officers, firefighters, EMS personnel, and other qualifying Texas heroes.
Both programs can be paired with eligible mortgage financing and may provide assistance toward the upfront cost of purchasing a home.
Do You Have to Be a First-Time Home Buyer?
Not always.
One of the biggest misconceptions about TSAHC is that its down payment assistance is exclusively for first-time buyers.
For TSAHC’s non-bond down payment assistance without a Mortgage Credit Certificate, borrowers are not required to be first-time home buyers. A buyer may have owned a home previously—and in some circumstances may currently own another home—as long as the new property meets the program’s requirements for their principal residence.
However, certain TSAHC options, including the Mortgage Credit Certificate (MCC) and some bond programs, do have a first-time home buyer requirement.
For these purposes, “first-time home buyer” generally means you have not owned a principal residence during the previous three years.
That means you don’t necessarily have to be buying the first home you’ve ever owned to be considered a first-time buyer.
How Much Down Payment Assistance Is Available?
Depending on the TSAHC program and loan option selected, eligible borrowers may receive down payment assistance based on a percentage of their mortgage loan amount.
TSAHC offers assistance that may be available as either a grant or a deferred forgivable second lien, depending on the mortgage and assistance option.
The funds may generally be used toward expenses such as:
Down payment
Closing costs
Prepaid expenses
Other eligible mortgage-related costs
This can be especially helpful for buyers who have enough income to comfortably afford a monthly mortgage payment but haven’t accumulated enough savings to cover all of the upfront costs associated with buying a home.
Grant vs. Forgivable Second Lien
It’s important to understand that not every type of down payment assistance works the same way.
TSAHC offers certain assistance in the form of a grant. Under TSAHC’s current guidance, the grant does not have to be repaid as long as the first mortgage isn’t refinanced or otherwise paid off during the first six months.
Another option is a three-year deferred forgivable second lien.
With this option, the assistance is forgiven in full after the third anniversary of closing. However, if the home is sold, refinanced, or transferred before the three-year period is completed, the second lien generally must be repaid.
The right option depends on your individual situation, including how long you expect to own the home and whether you anticipate refinancing.
What Credit Score Do You Need for TSAHC?
Credit requirements can depend on the type of mortgage you’re using.
Under TSAHC’s published guidelines, FHA, VA and USDA-RHS loans using the DPA or MCC/DPA programs generally require at least a 620 FICO score.
Conventional financing can have different requirements depending on the assistance selected. For example, TSAHC states that borrowers using a conventional loan with its forgivable second-lien DPA generally need at least a 640 FICO score.
Meeting TSAHC’s minimum credit requirements does not automatically mean you will qualify for the underlying mortgage. Your lender will still review your income, debts, credit history, assets and other qualifying factors.
TSAHC Income Limits
TSAHC programs also have income limits.
These limits aren’t necessarily one statewide number. The applicable limit can depend on factors such as the program being used, the property’s location and whether the property is located within a designated targeted area.
This is one reason I recommend having a lender review your specific scenario instead of assuming you make too much—or too little—to qualify.
What Is the TSAHC Mortgage Credit Certificate?
For qualifying first-time buyers, TSAHC also offers a Mortgage Credit Certificate, or MCC.
An MCC is different from down payment assistance. It provides an eligible homeowner with a federal income tax credit based on a portion of the mortgage interest paid.
TSAHC currently states that its mortgage credit is equal to 15% of the mortgage interest paid during the tax year, subject to applicable program and federal tax requirements.
The homeowner may potentially receive this benefit each year they remain eligible and continue occupying the property as their primary residence.
An MCC must be obtained as part of the home-buying and mortgage process—it cannot simply be added after you’ve already closed.
Because everyone’s tax situation is different, home buyers should consult with a qualified tax professional regarding how an MCC could affect their individual taxes.
What Types of Mortgages Can Work With TSAHC?
Depending on eligibility and current program guidelines, TSAHC assistance can be paired with several common mortgage programs, including:
FHA loans
Conventional loans
VA loans
USDA loans
This is important because TSAHC isn’t
necessarily a separate type of mortgage. Think of it as a homeownership assistance program that can work alongside an eligible underlying mortgage.
Choosing the right combination matters.
For example, a buyer with strong credit may want to compare conventional financing against FHA financing rather than automatically choosing FHA simply because down payment assistance is involved.
Does Down Payment Assistance Mean the Loan Is Free?
No.
Down payment assistance can reduce the amount of cash you need at closing, but buyers should look at the entire financing structure, not simply the amount of assistance being offered.
Interest rates, mortgage insurance, closing costs, assistance terms and future plans can all affect which option makes the most financial sense.
Sometimes receiving the maximum amount of assistance isn’t necessarily the best choice.
A good mortgage analysis should compare the available options and determine how much assistance you actually need.
Do TSAHC Buyers Need Home Buyer Education?
Yes. TSAHC requires home buyers using its programs to complete an approved home buyer education course before closing.
The course is designed to help buyers understand the home-buying process, mortgage financing and the responsibilities that come with homeownership.
How Do You Apply for TSAHC?
You don’t apply directly to TSAHC for your mortgage.
Instead, you work with a TSAHC-approved mortgage lender who can determine whether you meet the program requirements and help structure the mortgage and assistance.
The lender will review your overall mortgage qualifications along with TSAHC requirements, including applicable income limits, credit requirements and property eligibility.
Is TSAHC the Best First-Time Home Buyer Program?
It can be an excellent option, but there isn’t one program that’s best for every buyer.
Texas home buyers may have access to multiple forms of down payment assistance, first-time buyer programs and traditional low-down-payment mortgage options.
The important question isn’t simply:
“Do I qualify for down payment assistance?”
It’s:
“Which financing option puts me in the best overall position to buy this home?”
For some buyers, TSAHC can significantly reduce the amount of money needed at closing. For others, using their own funds with a different mortgage structure may result in a lower payment or better long-term financing.
That’s why I prefer to compare the options before recommending a program.
Buying Your First Home in Texas?
If you’re considering buying a home in The Woodlands, Montgomery County, the Houston area, or elsewhere in Texas, don’t assume you need a huge down payment before you can start looking.
There may be TSAHC down payment assistance or other financing options available based on your income, credit, occupation and overall financial situation.
And even if you’ve owned a home before, it’s worth checking—because you may still qualify for certain TSAHC programs.
The best place to start is with a mortgage pre-approval and a review of the programs available to you. From there, we can compare your estimated cash to close, monthly payment and long-term costs so you can decide which option makes the most sense for your home purchase.
Program guidelines, interest rates, income limits, assistance amounts and eligibility requirements are subject to change. This information is for general educational purposes and is not a commitment to lend. Eligibility is determined based on current program and mortgage guidelines.
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