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Texas First-Time Homebuyer Guide

Texas First-Time Homebuyer Guide

Thinking about buying a home in the Lone Star State but don’t know where to begin? As a resident of Texas, you have access to a number of specialty loans and buying assistance programs that can make your dream of homeownership a reality. Read on to learn more about the benefits of buying a home in Texas, the programs and loans you can use to purchase your first home, and about how New American Funding (NAF) can help you fund your dream. 

Resources for First-Time Homebuyers in Texas 

Texas residents taking part in the homebuying process enjoy a few unique resources, including the following. 

  • Access to down payment assistance and specialty loans: Some low-income residents can qualify for up to 5% of the cost of their down payment or closing costs when applying for a special loan program through the Texas Homebuyer Program
  • Homebuyer education: The state of Texas also operates a homebuyer education program you can use to learn more about the process of getting a mortgage and keeping up with housing and insurance payments. 

Qualifications for First-Time Homebuyers in Texas

To qualify as a first-time buyer in Texas, you must not have purchased a home for the past three years. However, this requirement matters only in the context of applying for first-time homebuyer programs; there are no legal requirements in the state of Texas to buy a home. As long as you’re able to secure funding and the homeowner is willing to sell you a property, you can buy a home. 

Questions to Ask Before Buying Your First House in Texas

Buying your first home can be an exciting process – but it’s important to start the homebuying process at the right time. Ask yourself the following questions before deciding if now is the best time to buy a home. 

1. What Are Your Personal Long-Term Goals? 

First, think about your long-term goals and how owning a house fits in with your current stage of life. For example, if you’re settled in your career and your current location feels like a good long-term fit, pursuing a mortgage loan might make sense over renting. On the other hand, if you’re not sure where you want to live long-term yet, the flexibility of renting could be more beneficial to you at the moment. 

2. What Is Your Financial Situation?

Owning a home is a major financial responsibility. In addition to your monthly mortgage payment (which includes both principal and interest), you will need to budget for extra items you didn’t have to cover when you were renting, including the following. 

  • Homeowners insurance: Homeowners insurance helps cover the cost of repairing your property or making you financially whole after an event like a fire or burglary. 
  • Private mortgage insurance: If you have less than 20% in a down payment and have a conventional loan, you will need to pay for private mortgage insurance (PMI) each month. You can remove PMI once you hit 20% equity in your property.
  • Funding fees: If you use a government-backed mortgage loan to buy your home, you will usually be required to pay some sort of fee that covers the cost of running the homebuyer programs. These fees may be levied as a single upfront cost, a monthly recurring charge added onto your mortgage loan or both. For example, FHA borrowers must pay an upfront 1.75% mortgage insurance premium when they borrow as well as a variable recurring monthly mortgage insurance charge. 

A mortgage calculator like this one available from New American Funding can help you more accurately estimate how much home you can afford before you shop. 

3. What Are Your Housing Needs?

Think about your housing needs and consider how these needs may change over time. Begin by pinpointing your ideal location, considering factors such as proximity to work, schools, and amenities and the overall ambiance of the neighborhood. Think about the size of the home that suits your family's requirements and future plans, keeping in mind factors like the number of bedrooms, bathrooms, and additional spaces such as a home office or a backyard. Exploring the types of architecture that are popular and historic to your area can also help guide your location choice and give you a more unique appreciation for your home. 

4. What Is the Real Estate Market Trend?

Create a rough estimate of what you can afford to pay per month for your mortgage loan using the steps below and bookmark a few favorite properties that fit both your needs and budget. Watch how property prices are changing over time and how mortgage rates are changing as well. Monitoring your local real estate market will help you start the homebuying process with financial confidence. 

5. What Are Your Mortgage Options?

Most lenders offer multiple mortgage options, which vary in their qualification standards and the properties you can purchase. To determine the type of mortgage loan that you’ll qualify for, start by pulling your credit report and taking a look at your credit score. Record your total household income, as some down payment assistance loan programs are limited to certain tax brackets.

First-Time Homebuyer Statistics in Texas

  • Average home price in Texas: $303,971

  • Minimum down payment in Texas: 0% (USDA and VA loans)

  • Max Texas homebuyer grant: Variable by local program

How to Apply for First-Time Homebuyer Loan Programs in Texas

Now that you know what to look for in a home, it’s time to shop for a loan to buy it. Here’s how to go through the process of getting your first mortgage loan.

1. Determine Your Budget 

Before you start the process of getting a mortgage loan, it can be helpful to use a mortgage calculator to estimate a reasonable budget for your housing. A mortgage calculator includes principal and interest, as well as some expenses of homeownership that you may not have anticipated – like mortgage insurance if you have less than 20% down at the time of purchase. 

2. Get Pre-Approved for a First-Time Home Mortgage

The next step after determining a basic budget is to get preapproved for a mortgage loan. During the preapproval process, NAF Loan Officers take a look at your finances to determine how much you can afford to borrow when buying a home. Your pre-approval letter will give you a more concrete, realistic budget. 

While the state of Texas does not offer independent down payment assistance programs on a state level, it does have a few loan programs available to make borrowing more affordable. 

  • TDHCA My First Texas Home: This home loan program offers a 30-year government-backed mortgage with a more competitive interest rate compared to market rates. You might also qualify for up to 5% in interest-free down payment assistance, which can go towards closing costs. 
  • Home Sweet Texas Home Loan Program: The Home Sweet Texas Home Loan Program offers a 30-year Fixed-Rate mortgage with competitive interest and up to 5% in down payment assistance. This assistance is offered as a grant or second mortgage depending on income qualifications. 

Individual cities in Texas may offer down payment assistance. Explore your town or city online to learn more about individual assistance programs you may qualify for. 

3. Hire a Real Estate Agent 

Hiring a qualified real estate agent is an essential and prudent step in the homebuying process. The complexities of the real estate market, coupled with the vast array of options and legal intricacies, can easily overwhelm even the most experienced buyers. A skilled real estate agent brings invaluable expertise to your home search, offering a deep understanding of local market trends, neighborhoods, property values, and negotiation strategies.

Friends, colleagues, and online real estate databases can aid your search for the right agent. Make sure to interview potential agents to gauge their understanding of your preferences and their communication style. NAF Homes*, an affiliate of NAF, can help you connect with real estate professionals in your area with personal concierge service. 

4. Start the Search for Your Dream Home

With your agent by your side, you can begin the search for your dream home. Sit down with your real estate agent and discuss must-haves and likes when it comes to your new house. Your agent can take a look at the budget you’re approved for in your pre-approval and recommend areas and specific houses that fit your needs. 

While you’re free to explore online databases to look for homes on the market, don’t be afraid to ask your agent to create some options for you as well. Real estate agents and other real estate professionals may be able to use their networks to give you access to homes not yet listed on the general market, giving you a shot to put in an offer ahead of the competition. 

5. Make an Offer 

Once you find the right home, it’s time to make an offer. Your real estate agent can help you look at comparable home sales, decide how much to offer on the property, and submit an offer letter. While there isn’t anything stopping you from writing your own offer letter, real estate agents know how to include all the details that are needed for a streamlined home sale. 

6. Conduct a Home Inspection 

If your offer is accepted, the next step is to schedule a home inspection. During a home inspection, an inspector tours your property. They will test systems and create a list of everything that needs to be repaired throughout the property. While a home inspection isn’t required like an appraisal, it gives you essential insight into the condition of the home you want to buy. 

7. Close the Deal and Become a Homeowner

If the home inspection comes back clean, you can move towards the closing process. During closing, you will sign your mortgage loan and take control of your new property. Make sure to review your loan documents before closing and leave your lender with plenty of time to make corrections if you find errors. 

5 Traditional First-Time Homebuyer Programs in Texas

One of the biggest benefits that you can take advantage of as a buyer in Texas is the series of mortgage loan options available to you. You can consider Conventional loans and government-backed mortgages when investing in your first home, with government-backed loans offering more flexible qualification criteria and credit standards. 

The following are the most common types of mortgage loans you’ll see between lenders and what you’ll need to qualify with each. 

1. Conventional Mortgage

Conventional loans are some of the most basic types of mortgage loan options and can be used to purchase most types of properties. If you have solid credit, you may qualify for a lower interest rate on your loan. However, you’ll only need a credit score of 620, as well as a down payment of 3%. You can avoid the private mortgage insurance (PMI) requirement by bringing at least 20% to the closing table. 

2. FHA Loan

FHA loans are government-backed mortgage loans with insurance from the Federal Housing Administration (FHA). These loans were introduced to help those with lower incomes and lower credit scores get an affordable mortgage payment. To qualify, applicants typically need a minimum credit score of around 580, though some lenders might accept scores as low as 500 points. Your debt-to-income ratio should generally be below 43%. A steady employment history is crucial, and your down payment must be equal to 3.5% or more. 

3. VA Loan

VA loans are specialty loans for members of the United States armed forces, veterans, and their families. To qualify for a VA loan, you will need to provide proof of service, and you will also usually need to pay a funding fee. The main benefit of a VA loan is that they do not require a down payment, which can make buying a home in an area with a higher cost of living more reasonable. 

4. USDA Loan

A USDA loan, offered by the U.S. Department of Agriculture, is a mortgage program designed to support rural and suburban homebuyers with moderate to low incomes. To qualify, buyers must meet specific location criteria, as the property being purchased should be in an eligible rural or suburban area defined by the USDA. You can see if your home qualifies by using the USDA homes search tool here

The unique benefit of USDA loans is that they don't require a down payment, which is great if you have limited funds. These loans also come with income limits based on the local median income, and you cannot earn more than 115% of the local median income in your area to qualify. You will also need a credit score of 580 points, and your mortgage payment shouldn’t make up more than 32% of your monthly income depending on credit requirements. 

5. Closing Assistance Programs

Closing assistance programs in Texas are sponsored by individual cities – there is not currently a statewide option for Texas homebuyers to access closing cost assistance. For example, residents buying a home in the city of Austin may qualify for up to $40,000 in down payment and closing cost assistance when purchasing their first home. Review your city’s local government literature to learn more about financial assistance. 

What are the Mortgage Rates in Texas?

Every mortgage payment that you make in Texas has two components: a principal payment that goes towards your loan balance and interest. Your interest rate is the percentage of your loan’s value that you’ll pay annually in exchange for financing. Interest rates are expressed as a percentage of the underlying loan value, with interest rates changing on a regular basis. 

Lenders like New American Funding keep mortgage rates updated with the most current market data to help you better research options in your budget. 

Take Advantage of First-Time Homebuying in Texas

According to a report from Texas A&M University, home sales in the state are on the rise.
New American Funding offers Texas first-time homebuyers a comprehensive and personalized mortgage experience in a competitive market. Our dedicated team of experts guides you through the complex process, ensuring you get the best loan options and rates available.

Get a Quote Now from New American Funding

Texas First-Time Homebuyer FAQs

Is There an Income Limit for First-Time Homebuyers in Texas?

If you aren’t aiming to use a homebuying program to purchase your property, there are no income limitations. However, there are income limits for first-time homebuying programs in Texas. These limits vary by location and are based on the median income in the area where you’re buying your first home.

Can a Person With Lower Income buy a House in Texas?

Yes, individuals with lower income can potentially buy a house in Texas using a number of programs. Texas offers government-backed mortgage loan options that can allow you to buy a home with a higher debt-to-income ratio or less-than-perfect credit. First-time buyer programs like the TDHCA My First Texas Home loan program may also help you access down payment and closing cost assistance. 

Does Texas Have First-Time Buyers Programs?

Yes, Texas has first-time buyers programs that can help pay for your down payment and closing costs on your loan. These programs are structured as buyers programs issued through participating lenders, and you are required to complete a homebuyer education course before funding is approved. 

Do you Have to Pay Back Down Payment Assistance in Texas?

You may need to pay back down payment assistance in Texas depending on the city where you’re buying your home and the terms of the assistance. Review your city’s individual down payment assistance program options when looking for forgiveness potential as Texas does not currently offer statewide assistance programs. 

How Much do First-Time Homebuyers Have to put Down in Texas?

First-time homebuyers in Texas usually need to put down a down payment of around 3% to 20% on their loan depending on the type of loan they are using to buy the home. Some loan options (like USDA and VA loans) allow buyers to purchase a home with $0 down. 


* NAF Homes, Inc. is an affiliate of New American Funding and does not originate mortgage loans or issue loan commitments.  NAF Homes, Inc. is a MI Real Estate Broker #6505431109, Tel. 844-626-1300.

NMLS #6606. Terms and Conditions Apply.  This is not a loan commitment or guarantee of any kind. Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination. Rates and terms are subject to change without notice.  All mortgage loan products are subject to credit and property approval.  © New American Funding, LLC. New American and New American Funding are registered trademarks of New American Funding, LLC. All Rights Reserved. Corp Office 14511 Myford Rd, Ste 100, Tustin, CA 92780. Ph 800-450-2010.   

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