First-Time Home Buyer Programs in Texas: Down Payment Assistance, Grants & Tax Credits (2026)

Texas has some of the most generous first-time home buyer assistance programs in the country — and most buyers in the Austin area have never heard of any of them, which means they are leaving real money on the table at closing. We are talking about up to 5% of your loan amount in down payment assistance, grants that never need to be repaid, and a federal tax credit worth hundreds of dollars every year for the life of your mortgage. This guide covers every major program available in 2026, with real income limits for Travis and Williamson counties, and a plain-language FAQ section so you can figure out quickly whether you qualify.

Who Counts as a "First-Time Buyer" in Texas? (It's Not What You Think)

Here is the first thing that surprises most people: you do not have to be buying your first home ever. Under Texas program rules, a "first-time homebuyer" is defined as anyone who has not owned a primary residence in the past three years. That definition opens the door to a much wider group of buyers than most people realize.

If you owned a home five years ago and have been renting since — you qualify. If you owned a condo that you never lived in as your primary residence — you may qualify. If you went through a divorce and your ex-spouse kept the home — you likely qualify. If you are a veteran — many programs waive the first-time buyer requirement entirely regardless of ownership history. The three-year clock resets your eligibility, which means a significant number of Austin-area renters who think these programs do not apply to them are wrong.

Program 1: My First Texas Home (TDHCA)

Run by the Texas Department of Housing and Community Affairs (TDHCA), My First Texas Home is the largest state-level homebuyer assistance program in Texas. It combines a 30-year fixed-rate mortgage at a below-market interest rate with down payment and closing cost assistance of up to 5% of the loan amount — structured as a 0% interest second lien that is fully forgivable after three years if you remain in the home.

What You Get

• 30-year fixed-rate mortgage at a below-market rate set by TDHCA (updated regularly — ask a participating lender for the current rate)
• Down payment and closing cost assistance of up to 5% of the loan amount as a 0% interest second lien
• The second lien is fully forgivable after 36 months if you remain current on your first mortgage and the home stays your primary residence
• Works with FHA, VA, and USDA loan types
• Can be combined with a Mortgage Credit Certificate (MCC) for additional annual tax savings

Austin-Area Income Limits (Travis & Williamson Counties, 2026)

Income limits for the Austin-Round Rock MSA — which includes Travis, Williamson, Bastrop, Caldwell, and Hays counties — are among the highest in the state, reflecting the region's elevated median incomes. The current limits for non-targeted areas run approximately:

Income limits are updated periodically by TDHCA based on HUD Area Median Family Income data. The figures above reflect 2025–2026 program data for the Austin-Round Rock MSA. Always verify current limits at welcomehome.tdhca.texas.gov or with a participating lender before applying, as limits adjust annually. Targeted areas (census tracts designated as areas of economic distress) carry significantly higher income limits.

Key Requirements

• Minimum credit score of 620
• Must not have owned a primary residence in the past 3 years (waived for veterans and targeted area purchases)
• Must occupy the home as primary residence within 60 days of closing
• Homebuyer education course required for all borrowers
• Must work through a TDHCA-approved participating lender — you cannot apply directly to TDHCA
• Funds are allocated first-come, first-served and subject to availability — apply early in the fiscal year

Program 2: My Choice Texas Home (TDHCA)

My Choice Texas Home is the sister program to My First Texas Home — with one critical difference: it removes the first-time buyer requirement entirely. Repeat buyers who have owned homes before and do not meet the three-year rule can still access below-market rates and up to 5% in down payment and closing cost assistance through this program.

The income limits under My Choice Texas Home are generally higher than those under My First Texas Home, making it accessible to a broader range of Austin-area buyers. The structure of the assistance is identical: a 30-year fixed-rate mortgage paired with a 0% interest second lien forgivable after 36 months. It works with FHA, VA, USDA, and conventional loan types. If you previously owned a home and are not sure whether you qualify for My First Texas Home, My Choice Texas Home is the program to ask your lender about first.

Program 3: TSAHC Home Sweet Texas & Homes for Texas Heroes

The Texas State Affordable Housing Corporation (TSAHC) — a separate state agency from TDHCA — runs two programs that are among the most actively used in the Austin metro. Both provide 30-year fixed-rate mortgages paired with down payment assistance of 3–5% of the loan amount, available as either an outright grant (no repayment required, ever) or a forgivable second lien that disappears after three years.

Home Sweet Texas — For All Eligible Buyers

Open to first-time buyers (or those who haven't owned in three years) across all income levels who meet TSAHC's income limits. In Travis County, the 2025–2026 income limit runs approximately $167,250 for non-targeted areas, regardless of household size — one of the most generous limits of any Texas program at this price point. There is no purchase price cap embedded in the income limits themselves, but you must stay within conforming loan limits.

Homes for Texas Heroes — For Essential Workers

Identical benefits to Home Sweet Texas, but specifically for teachers (public school, pre-K through 12), police officers, firefighters, EMS personnel, corrections officers, county jailers, and veterans. Heroes get one additional benefit: the Mortgage Credit Certificate (MCC) fee is waived entirely — a savings of approximately $500 at closing. This program does not require first-time buyer status. If you served in the military or work in any of the qualifying professions, this is the first program to check.

The Grant vs. Forgivable Loan Choice

TSAHC gives you a choice of how to receive your assistance. The grant option provides 3–5% of the loan amount with absolutely no repayment requirement — it is yours at closing. The forgivable second lien provides the same amount at 0% interest, with the balance forgiven in full after three years if you remain in the home and do not refinance. The grant typically comes with a slightly higher interest rate on your first mortgage. The forgivable loan option typically offers a slightly better first mortgage rate. Which is better depends on your specific situation — run both scenarios with your lender.

Program 4: The Mortgage Credit Certificate (MCC) — Most Underused Tool in Texas

The Mortgage Credit Certificate is the most powerful and most ignored tool in the Texas first-time buyer toolkit. Unlike the down payment assistance programs above — which help you get into the home — the MCC reduces your federal income tax bill every single year for as long as you live in the home and have a mortgage. It is a dollar-for-dollar reduction in what you owe the federal government, not a deduction.

How the MCC Works

The MCC issued through TSAHC provides a federal tax credit equal to 15% of the mortgage interest you pay each year. Here is what that looks like in real numbers on a $350,000 loan at 6.5%:

• Year 1 mortgage interest paid: approximately $22,400
• MCC credit at 15%: approximately $3,360
• That $3,360 comes directly off your federal tax bill — dollar for dollar
• The maximum annual credit is capped at $2,000 per year under IRS rules
• You claim it every year using IRS Form 8396 on your federal tax return
• The credit continues for the entire life of the mortgage as long as the home remains your primary residence

Over a 10-year period, an MCC on a $350,000 loan saves a buyer approximately $17,000–$20,000 in federal income taxes — money that comes back to you year after year, not just at closing. That is a substantial benefit that most buyers miss entirely because their real estate agent or lender never mentioned it.

Important 2026 MCC Update

TSAHC's standalone MCC program has been discontinued. As of 2026, the MCC is only available when combined with TSAHC's down payment assistance program (Home Sweet Texas or Homes for Texas Heroes). You cannot get an MCC through TSAHC without also using their DPA. TDHCA also offers an MCC through the My First Texas Home program — your participating lender can package both together. If you qualify for DPA, always ask whether you can stack an MCC on top of it. The combination of grant money today and tax savings every year is the most powerful combination available to a Texas first-time buyer.

How to Actually Use These Programs: Step by Step

The single most important thing to understand about every program on this list: you cannot apply to TDHCA or TSAHC directly. All assistance is delivered through approved participating lenders. That means your first step is finding a lender who is actively working with these programs — not every lender participates, and some who do participate rarely use them and are not up to date on current guidelines.

1. Check basic eligibility first. Use TSAHC's free online Eligibility Quiz at tsahc.org to get a quick read on whether you qualify for TSAHC programs. For TDHCA programs, visit welcomehome.tdhca.texas.gov. These take about two minutes and give you a useful starting point.
2. Find a participating lender early. Both TDHCA and TSAHC publish lists of approved lenders on their websites. Look specifically for lenders who regularly originate these program loans — ask them how many DPA loans they have closed in the past 12 months. A lender who does them regularly will move your file faster and make fewer errors.
3. Bring it up at your very first lender conversation. Down payment assistance and MCCs must be arranged before the loan is structured. You cannot add an MCC after the loan is in underwriting. Start the conversation at the pre-approval stage, not after you are under contract.
4. Complete the homebuyer education course. Every TDHCA and TSAHC program requires a HUD-approved homebuyer education course. Do this early — it is available online and typically takes 4–8 hours. A completion certificate is required at closing and cannot be obtained after the fact.
5. Apply early in the fiscal year. TDHCA programs are funded on a first-come, first-served basis. Funds have run out mid-year in previous years. If you are planning to buy in 2026, do not wait until fall to start the process.
6. Do not change jobs, open new credit, or move large sums of money between application and closing. Program loans go through the same underwriting as standard mortgages, and any of these actions can delay or kill your approval.

What $400K Looks Like With vs. Without Assistance

Here is a side-by-side view of what a $400,000 purchase in Round Rock looks like for a qualifying first-time buyer using TSAHC's Home Sweet Texas program with a 5% DPA grant versus buying without any assistance, both at 6.5% on a 30-year fixed loan. Down payment assumed at 3.5% (FHA) without assistance, reduced to near-zero with the grant covering the full 3.5% requirement.

Example uses a $400,000 purchase price, FHA loan at 3.5% down, 6.5% rate, 30-year fixed. Grant amount based on 5% of the loan amount (~$400,000 × 0.965 = $386,000 loan × 5% ≈ $19,300). MCC credit estimated at 15% of Year 1 interest with $2,000 annual cap applied. Actual rates, grant amounts, and tax credits depend on program availability, current TSAHC/TDHCA rate sheets, and individual tax situations. Verify all figures with a participating lender and a tax advisor.

Frequently Asked Questions: Will I Qualify?

Do I qualify if I owned a home more than three years ago?

Yes. The standard Texas first-time buyer definition requires only that you have not owned a primary residence in the past three years. If your last home was sold or transferred more than three years before your application date, you meet the ownership requirement for TDHCA and TSAHC programs.

Does my spouse's ownership history affect my eligibility?

For most TDHCA programs, both spouses must meet the three-year ownership rule. If your spouse owned a home within the past three years, you may not qualify for My First Texas Home as a couple, even if you personally have not owned in that window. Veterans are exempt from this requirement. Some TSAHC programs treat this differently — verify your specific situation with a participating lender.

Can I qualify if I'm buying a home in a higher price range?

Both TDHCA and TSAHC programs have purchase price limits by county. In most Austin-area counties, the 2026 purchase price limit for non-targeted areas runs approximately $400,000–$475,000 for standard program loans. Targeted areas (certain census tracts) carry higher limits. If you are buying above these limits, you may not qualify for state DPA programs — but you may still qualify for an MCC in some cases. Confirm the current limits for the specific county you are buying in with a participating lender.

What is the minimum credit score to qualify?

Most TDHCA and TSAHC programs require a minimum FICO score of 620. Some programs accept scores as low as 620 for FHA loans. Scoring above 680 typically unlocks better interest rates and higher tiers of assistance. If your score is below 620, focus on score improvement first — a 40–60 point increase can make a meaningful difference in both your eligibility and your first mortgage rate.

Can I use down payment assistance with a VA loan?

Yes. Both My First Texas Home and TSAHC programs are compatible with VA loans. VA loans already require no down payment, so if you are using a VA loan, the DPA assistance can often be applied entirely toward closing costs — reducing your out-of-pocket cash to close significantly. Veterans using TSAHC's Homes for Texas Heroes program also receive the MCC at no additional cost.

Is the MCC tax credit the same as the mortgage interest deduction?

No — and the distinction matters. The mortgage interest deduction reduces your taxable income, which saves you money at your marginal tax rate. The MCC is a tax credit, which reduces your actual tax bill dollar for dollar. A $2,000 MCC credit saves you exactly $2,000 in federal taxes owed, regardless of your income bracket. You can still claim the mortgage interest deduction on the remaining 85% of interest not covered by the credit. They work together.

What happens to the down payment assistance if I sell or refinance early?

If you received TSAHC assistance as a grant — nothing. Grants have no repayment requirement under any circumstances. If you received assistance as a forgivable second lien and you sell or refinance before the three-year forgiveness period is complete, the remaining outstanding balance becomes due and payable at that transaction. After the three-year mark, the balance is fully forgiven with no recapture. Plan accordingly if you think you might move or refinance in the short term — the grant option may be the better choice in that scenario.

Can I qualify if I have student loan debt?

Student loan debt affects your debt-to-income ratio (DTI), which lenders use to qualify you for the mortgage. Program loans follow the same DTI guidelines as the underlying loan type (FHA, VA, USDA, or conventional). FHA loans typically allow DTI up to 57% through automated underwriting, and some programs allow FHA manual underwriting up to 43% DTI with a minimum 640 score. Student loan debt is calculated into your DTI, but it does not automatically disqualify you. Run your actual numbers with a participating lender.

Do these programs work with new construction?

Yes — both TDHCA and TSAHC programs can be used with new construction purchases, provided the home meets program guidelines, is located in Texas, and will be your primary residence. New construction timelines can occasionally create challenges with program rate lock periods, so flag it early with your lender if you are buying a build that will not close for several months.

Is there a homebuyer education requirement?

Yes, every major Texas first-time buyer program requires completion of a HUD-approved homebuyer education course before closing. These courses are available online, typically cost $75–$100, and take 4–8 hours to complete. You will receive a certificate of completion that is required at closing. Complete it early in the process — it cannot be done after closing, and delays here can push your closing date.

Next Steps

If you are a first-time buyer in the Austin metro — or if you have not owned a home in the past three years — the first step is figuring out which programs you qualify for and which lenders in the area actively work with them. I work with buyers at every price point and income level, and part of what I do before any home search begins is help you understand the full financial picture — including which programs you qualify for, how to stack them, and what they actually mean for your cash to close and your monthly payment.

• Check the Austin Metro Market Snapshot — current inventory, days on market, and price trends updated regularly.
• Browse all current listings filtered to the price range your real monthly budget supports.
• Talk to Vlad directly — I will build the full cost model for your specific situation before you write an offer on anything.