Texas Down Payment Assistance: How It Works and When It Fits

The short answer: Down payment assistance in Texas is money from state, city, nonprofit or lender programs that helps cover your down payment or closing costs. It may come as a grant, a forgivable loan or a deferred loan. Many buyers don’t need it, so it’s worth comparing with your regular loan options before you decide.

So let’s start with something that surprises a lot of people. Most of the buyers I work with never use down payment assistance. They qualify for a loan that needs less money down than they expected, or the seller helps with closing costs, and that’s enough.

For some buyers, though, assistance is the piece that makes the numbers work. If that might be you, it helps to know how these programs work before you count on one. These are the things I walk my clients through.

Start here: you may need less than you think

Many people believe they need a huge amount saved before they can buy a home. That’s often not true. Several common loan types need far less down, and eligible veterans and some rural buyers may not need a down payment at all.

Your loan type, your credit and the home you choose all play a part. So before I look at assistance, I look at which loan fits you best. Sometimes that answer alone solves the problem. You can see the main options on my Loan Programs page.

What down payment assistance is

Down payment assistance is money that helps cover your down payment, your closing costs or both. It comes from state housing agencies, cities, nonprofits and the lenders themselves. Each one has its own rules, and the help comes in a few different forms.

The main types of assistance

Grants. A grant doesn’t have to be paid back. Once you close, the money is yours. Keep in mind that many grant programs come with a slightly higher interest rate, so the help isn’t free over the life of the loan.

Forgivable loans. These are set up as a second loan on your home. If you live there and keep the home for a set number of years, the loan is forgiven and the lien is released. And I say lien because you’ll be signing second mortgage paperwork at closing. If you sell or refinance before that time is up, you may have to pay some or all of it back.

Deferred loans. With a deferred loan, you don’t make monthly payments on the assistance. You repay it later, usually when you sell, refinance or move out. Let’s say you receive $10,000. You might not owe it back until you sell the home, even if that’s many years from now. Many of these loans charge no interest, so the amount stays the same.

Texas programs to know about

Statewide, the two big names are TDHCA, which offers My First Texas Home, and TSAHC, which runs Homes for Texas Heroes and Home Sweet Texas. Here in San Antonio, the city also has its own Homeownership Incentive Program.

Each program has its own rules for income, purchase price and who qualifies, and those rules change. I check the current details for each client, so you’re never relying on a list that’s out of date.

Some lenders also offer their own assistance programs, separate from the state and city ones. These aren’t advertised in one place, and the rules differ from lender to lender. Because I work with NEXA Lending, a mortgage broker with access to more than 300 lenders, I can compare those lender programs alongside the state and city options to see which one, if any, fits you best.

Who qualifies

You don’t always have to be a first-time buyer. Most programs count you as first-time if you haven’t owned a home in the past three years, and some are open to repeat buyers too.

Many programs have income limits based on your county and household size. Some require the home to be in a certain area. Most ask you to take a homebuyer education class first. These classes are usually online and take a few hours.

The trade-offs

Assistance can be a real help, but it’s worth knowing what comes with it. Some programs carry a higher interest rate or extra fees. A forgivable loan can limit when you sell or refinance without paying it back. And assistance usually doesn’t cover everything. You’ll still need money early in the process for things like your earnest money, the inspection and the appraisal.

Who it’s not for

Assistance isn’t the right fit for everyone. If you plan to sell or refinance in the next few years, a forgivable loan may come due. If you already have enough saved, paying a higher rate for 30 years can cost more than the help is worth. And if your income is above a program’s limits, the loan options I mentioned earlier are usually the better path.

How I help you decide

So this is how I approach it. I look at your loan options first. Then I compare them side by side with any assistance you qualify for, including the rate and the long-term cost. Then you decide. Sometimes assistance wins. Often it doesn’t, and that’s fine too.

Frequently asked questions

Do I have to be a first-time homebuyer? Not always. Most programs count you as a first-time buyer if you haven’t owned a home in the past three years, and some programs accept repeat buyers.

Does down payment assistance have to be paid back? It depends on the type. Grants don’t. Forgivable loans are forgiven after a set time if you meet the rules. Deferred loans are usually repaid when you sell, refinance or move.

Is there a catch? Some programs come with a higher interest rate or added fees, and forgivable loans can limit when you sell or refinance. That’s why I compare your options side by side before you choose.

Can I use assistance on a home that needs work? Sometimes. It depends on the program and the loan you pair it with. Ask me before you make an offer, so we can check that the two work together.

Candy Williams, NMLS #187126, is a licensed loan officer with NEXA Lending, a mortgage broker with access to more than 300 lenders (NEXA NMLS #1660690). Equal Housing Opportunity. This article is for general education and is not a commitment to lend. All loans are subject to credit approval, property eligibility and program guidelines, which can change. Client details have been changed to protect privacy, and individual results vary.