Many Americans who aspire to be homeowners are now putting money together for a down payment. However, they are unaware of the down payment requirements of lenders. Moreover, far too few people are aware of down payment assistance options.
On the other hand, down payment assistance (DPA) programs can be lifesavers for individuals who know how to take advantage of them. They can cover all or part of the down payment and closing fees when purchasing a property. DPA can be a one-time award that you never have to pay back. Most of the time, it's a loan of some kind, usually with low or no interest.
In many circumstances, you will only have to pay back the loan when you sell your house. Alternatively, if you dwell in the house for a set number of years, the lender may forgive the loan.
What potential homeowners must understand about the DPA
The Urban Institute looked at the knowledge gaps of persons who want to be homeowners towards the end of 2017. If you believe things have changed significantly.
Some of the observations from a survey included in the report are as follows:
More than half (53%) of renters say saving for a down payment prevents them from becoming homeowners.
Around 80% of respondents were either unsure of how much a lender requires for a down payment or thought it had to be more than 5% of the buying price.
15% believe lenders need to make a 10% down payment.
A shocking 30% of people believe that lenders expect a 20% down payment.
They are wrong on the last two, though. Down payments ranging from 3-3.5% are standard. Those who qualify for loans guaranteed by the Department of Veterans Affairs (VA loans) or the United States Department of Agriculture (USDA loans) do not need to put down any money.
Buyers who use DPA may need less than a 3% down payment and be eligible for closing cost assistance. If you don't ask, you'll never know.
How does down payment assistance operate in Texas?
It's worth mentioning that these initiatives are funded yearly by the agencies, charities, and local governments that sponsor them. As a result, they may have plenty of cash at the start of each fiscal year yet run out before the conclusion. The federal government budgetary policy runs from October 1 to September 30. As a result, you have a better chance of getting that money in the fall than you have in the late summer.
However, not all program fiscal years are the same, and not all budgets are annual. You may have multiple options with thousands of down payment assistance programs running in practically every community around the country. Almost majority of the programs are local and unrelated to one another. Many are administered by the state, city, or local governments, while non-profits or charities run others.
Eligibility criteria for down payment assistance in Texas
The eligibility requirements for various programs varied dramatically. So, if you don't qualify for one in your area, keep looking to see if you can find one that will help you.
Some programs cater to specific demographics. If you're a veteran/current servicemember, a firefighter, or work in education, health care, or law enforcement, you may be able to get to the front of the line. Many others give preference to those with ordinary or lower earnings. Anyone with a mortgage preapproval letter, however, is eligible to apply.
Before they give you any money, several programs require you to take a homebuyer education course. This course will take some time but is worth it. It is a crucial phase, and knowing what to do boosts your chances of success.
Being a first buyer is not an issue.
If you haven't possessed property in the last three years, the US Department of Housing and Urban Development (HUD) considers you a first-time buyer. To be clear, according to HUD's website:
"An individual who has not purchased a residence for the previous three years, ending on the date of purchase of the property. It includes a spouse (both are considered first-time homebuyers provided they match the following criteria)."
There is no law requiring everyone to use HUD's definition. However, many programs do. So, if you or your spouse hasn't owned a primary residence in the last three years, keep on and apply for first-time buyer programs. You can only use your spousal qualification if you're buying a house with them.
Locate a DPA program that suits your need while in Texas.
Because of the large number of organizations and programs, no set of guidelines governing how down payment help works in Texas. It makes them more challenging to locate and comprehend. You can be eligible for one program but not for another. You could receive an outright grant (essentially a gift) from one but a low- or no-interest loan from another.
Approved Lenders
You'll borrow from a lender who participates in the program if you accept down payment assistance. And those licensed lenders typically offer a wide choice of mortgages, including government-backed loans (VA, USDA, or FHA loans) and those that follow Fannie Mae and Freddie Mac's requirements.
There are over 167 DPA programs in Texas. Here are some of the popular ones:
Texas Veterans Land Board
Texas Veteran Land Board Program (TVLB) offers low-interest loans to qualified Texas Veterans to purchase a home within Texas.
Veterans are eligible for special loan assistance.
Fixed-term of 15 or 30 years, fully amortized.
There are three sorts of loans: conventional, VA, and FHA.
Southeast Texas Housing Finance Corp (SETH)
SETH is a 30-year fixed-rate, first-lien program with FHA, USDA, and FNMA options. With FHLMC, you can go conventional with 2nd lien alternatives and a grant option.
Down payment assistance, up to 5% for FHA, USDA, and FNMA.
The first mortgage comes with full amortization and has a 30-year fixed term.
You must take a homebuyer education course.
Texas Department of Housing and Community Affairs (TDHCA)
The body designed this program to make house ownership more accessible for low- and moderate-income people and families in Texas, particularly first-time home buyers.
It is possible to use Up to 5% of the loan amount for the down payment and closing fees.
Up to 4% for the FHLMC grant
There may be credit and income restrictions.
Available for the whole state of Texas except for Travis County and the cities of El Paso, Grand Prairie, and McKinney
Texas State Affordable Housing Corporation (TSAHC)
TSAHC offers fixed-rate first mortgage loans with down payment assistance grants (DPA).
Up to 5% of the loan amount is available for down payment or closing fees in the form of down payment assistance.
Fixed-term contract of 30 years
Loan types include conventional, USDA, VA, and FHA.
You must take a homebuyer education course.
Home Grant Program for Hill Country HFC
The Hill Country Home Down Payment Assistance (DPA) Grant Program aims to assist first-time homebuyers in obtaining FHA and USDA-RD financing to purchase a home in Travis County, including Austin.
Up to 4% of the purchase price or appraised value in down payment assistance
30-year fixed term with full amortization
Only FHA and USDA loans are available
A homebuyer education course is required
Credit and income limits may apply