Texas continues to attract home buyers with its reasonable cost of living, ample job opportunities, and mostly sunny weather. It also has ridiculously low taxes, being one of the nine U.S states with no income tax.
The median home value in Texas is currently at $210,343. Online real estate database Zillow predicts that the home value index of the state will climb 3.6 percent in the next year. Luckily, Texas offers various mortgage programs to help buyers afford their dream homes.
But check if you meet the eligibility requirements for the first-time home programs by the Texas Department of Housing & Community Affairs (TDHCA).
TDHCA First-Time Home Buyer Eligibility
If you haven’t owned a primary residence in the state within the last three years, TDHCA automatically considers you as a first-time home buyer. But honorably discharged veterans don’t have to meet this requirement.
All borrowers must also meet the following criteria:
- A minimum credit score of 620
- Income and purchase limits, depending on your county
- The property must be a single-unit condominium or a single-family home
Note that properties in “targeted areas” have no first-time home buyer requirements and enjoy higher income and purchase price limits. These are areas where most families earn less than 80 percent of the state’s median income.
TDHCA offers two state-wide first-time home buyer loan programs: My First Texas Home and Texas Mortgage Credit Certificate.
My First Texas Home Loan
This 30-year, fixed-rate mortgage offers down payment and closing cost assistance up to five percent of the loan amount. This assistance is taken as a no-monthly payment, no-interest second lien. This means you don’t have to repay the closing cost and down payment loans until you sell, refinance, or finish paying off the house.
My First Texas Home is applicable for conventional loan products as well as government-backed mortgage programs from the Federal Housing Authority (FHA), Veterans Administration (VA), and U.S. Department of Agriculture (USDA).
You can combine My First Texas Home loans with the Texas Mortgage Credit Certificate program to reduce your federal tax bill.
Texas Mortgage Credit Certificate
Lenders profit off the interest they charge from your regular mortgage payments. You can recover some of the total interest you’ve paid through the Texas Mortgage Credit Certificate (MCC), giving you additional savings on your federal income taxes.
This program provides a dollar-for-dollar reduction on your federal tax liability for the lifetime of the loan and as long as the property remains your primary residence. The tax credit is 40 percent of your annual mortgage interest, up to $2,000 per year.
You can apply for an MCC without getting a My First Texas Home loan. There’s no minimum credit score required for the stand-alone MCC option.
Texas also offers various first-time home buyer grants per region. Some of these grants can be combined with the state and national mortgage programs for maximum benefit.
Before you even start looking for a property, determine how much you can afford. This way, you can keep your budget and expectations in sync and in check. Research on the mortgage options available in your location to make your first home purchase as affordable as possible.