Down Payment Assistance in Texas: How It Works

Down payment assistance (DPA) programs help qualified Texas buyers cover some or all of their down payment and, in some cases, closing costs. Assistance usually comes as a grant or a second loan that may be forgiven over time or repaid when you sell or refinance. Eligibility typically depends on income, credit, the home's price, and sometimes whether you are a first-time buyer or work in a qualifying profession.

For many Austin-area buyers, the down payment is the biggest hurdle. DPA can shorten the time it takes to buy by years, so it is worth asking about even if you think you will not qualify.

Key takeaways

• DPA is offered by state agencies, local housing finance programs, and some cities and counties.
• Assistance may be a grant, a forgivable second loan, or a deferred second loan repaid later.
• Common requirements include income limits, a minimum credit score, a homebuyer education course, and using the home as your primary residence.
• DPA pairs with FHA, VA, USDA, and conventional loans. Our product guide includes down payment assistance up to 100% on agency loans for eligible buyers.
• Program funding and rules change, so check current availability with a lender before you plan around a specific program.

How down payment assistance works

Most DPA programs take one of three forms:

1. Grants. Money you do not have to repay, as long as you meet the program's terms.
2. Forgivable second loans. A second lien that is forgiven over a set number of years if you stay in the home. If you sell or refinance early, part or all of it may be due.
3. Deferred or repayable second loans. A second lien with no payment, or a small payment, that is repaid when you sell, refinance, or pay off the first mortgage.

The assistance is usually tied to a specific first mortgage offered through the program. That first mortgage is often an FHA, VA, USDA, or conventional loan.

Where Texas DPA comes from

Statewide programs

Texas has statewide programs run by state housing agencies, including the Texas Department of Housing and Community Affairs (TDHCA) and the Texas State Affordable Housing Corporation (TSAHC). These programs have offered down payment help to eligible buyers across the state, and some also offer mortgage credit certificates that can reduce federal income taxes. Some TSAHC programs have focused on professions like teachers, first responders, and veterans. Program names, amounts, and income limits are updated regularly.

Local and regional programs

Some cities, counties, and regional housing finance corporations offer their own assistance, sometimes with different income limits or target neighborhoods. The City of Austin has offered down payment assistance to eligible buyers within city limits, and nearby communities have had their own programs at times. These can change based on funding.

Special programs

A few programs are aimed at specific buyers:

• Texas Veterans Land Board (VLB) home loans for eligible Texas veterans, which we offer on conventional, FHA, and VA loans.
• Good Neighbor Next Door, a HUD program for eligible law enforcement officers, teachers, firefighters, and EMTs buying in designated areas.
• FHA with a very small down payment options for eligible buyers, which our product guide lists as FHA $100 down.

Who typically qualifies

Rules differ by program, but common requirements include:

• Income limits, often based on household size and county.
• Purchase price limits.
• Minimum credit score, which varies by program and loan type.
• Primary residence. DPA is not for investment properties or second homes.
• Homebuyer education. Many programs require an approved course, often available online.
• First-time buyer status for some programs. Under many programs, you count as a first-time buyer if you have not owned a home in the past three years, and veterans are sometimes exempt from this rule.

Things to weigh before using DPA

Down payment assistance is a great tool, but it is not free money in every case. Consider:

• The first mortgage terms. DPA programs may come with pricing that differs from a standard loan. We will show you both side by side.
• Repayment triggers. Know exactly when a second loan would be due if you sell or refinance.
• Timing. Some programs require approvals that can add time. We plan for that in your contract dates.
• Your long-term plans. If you might move in a couple of years, a forgivable loan with a longer forgiveness period may not be fully forgiven.

Common myths about down payment assistance

"It is only for very low incomes." Many programs set income limits well above what people expect, especially for larger households. It is worth checking before you rule yourself out.

"It will scare off sellers." A well-prepared DPA buyer with a solid pre-approval is a strong buyer. What worries sellers is uncertainty, so we make sure your approval and timeline are clear from the start, and we talk with the listing agent if it helps.

"It takes forever." Some programs add steps, but with early planning and complete documents, DPA loans can close on a normal timeline. We build any extra time into your contract dates up front.

"I make too much to get help." Some programs are aimed at specific professions, like teachers, first responders, and veterans, and some conventional options have their own income rules. The only way to know is to check.

"Grant money is always the best deal." Not always. Sometimes a larger down payment you save yourself, or a different first mortgage, costs less over time. We will show you the full picture before you choose.

How to get started

1. Check your eligibility. Call us or start an application. We will look at your income, credit, and target price and tell you which programs you may fit.
2. Take a homebuyer education course if the program requires one. Completing it early keeps things moving.
3. Get pre-approved with the DPA program built into your approval, so your offer is accurate.
4. Let your Realtor know you are using DPA. It helps them set realistic timelines in the contract.
5. Keep your documents ready. DPA files often need extra paperwork, like income verification for everyone in the household.

Use our affordability calculator to see how much home might fit your budget, then read our down payment assistance page and first-time home buyer page for more detail.

Let's find the right program

Programs change, and the right one depends on where you are buying, what you earn, and which loan fits you best. We work with Austin-area buyers every day and will lay out your options plainly. Call 512-657-1333 or get started online.

Additional terms and conditions apply. Not all loan types are compatible with this product. Subject to underwriting conditions. Not a promise to make a loan. All borrowers must qualify. Network Funding, LP NMLS #2297. Kyle Richardson NMLS #863464. Equal Housing Lender.