Many potential Texas home buyers often think about how much they need to save to qualify for a mortgage. In fact, one of the hindrances to homeownership is not having enough saved up for a down payment.
Buying a home for the first time is a daunting task. The good news is there are Texas home loan programs that can assist first-time homebuyers by providing programs that educate and give grants and loans that can help cover down payment and closing costs.
If you plan to relocate to Texas, there are plenty of places you can turn to for help. Did you know that there are programs that allow you to buy a home without a down payment?
You read it right, zero down payment mortgage programs are available in Texas.
Let’s look at some of the first-time homebuyer programs you can consider. Two government-backed loans that allow you to purchase your first home with a 0% down payment and low down payment mortgage options.
The TSAHC operates statewide and partners with nonprofit Texan organizations to support the critical housing needs of very low-income households. There are several programs. Here are the two major homebuyer assistance programs:
Homes for Texas Heroes Home Loan Program which features a fixed-rate mortgage program for firefighters, teachers, EMS personnel, police officers, correctional officers, and veterans.
Homes Sweet Texas Home Loan Program provides a fixed-rate mortgage program for Texas homebuyers who have low and moderate incomes.
To qualify for either program, you need a credit score of at least 620 and above, along with other criteria.
The TDHCA is a first-time Texas home buyer program that assists moderate and low-income families to become homeowners.
The program was designed for buyers who haven’t owned a home as their primary residence in the past three years and want to become first-time homeowners. They offer mortgage tax credits, down payment, and closing costs assistance. They also give higher income and purchase price limits in selected areas.
To qualify for TDHCA loans, Texans need a minimum credit score of 620, buy a property that is a primary residence, conform to income and purchase price limits, and buy a single-family home or single-unit condo.
A down payment is the first payment you make towards your home and is computed as a percentage of the total amount you borrow. For example, if you buy a home worth $200,000 and are required to pay 20% down upon closing, you’ll need to pay a $40,000 down payment when you close the deal.
This becomes a major hurdle to homeownership for many Texans as it can take years to save up for a down payment.
The solution would be to apply for government-backed loans that offer no down payment programs.
Ask your trusted Austin mortgage broker for more information.
VA loans are backed by the Department of Veterans Affairs and are a good choice if you want to buy a home without a down payment. You may qualify if you are an active-duty military member, reserve veteran, member of the National Guard, or surviving spouse of a deceased veteran.
For their no down payment program, you pay a one-time VA funding fee of 2.3% of your loan value instead of paying for mortgage insurance.
Most lenders also require a credit score of at least 580 to qualify for a VA loan.
On the other hand, USDA loans also offer zero down payment programs and are backed by the United States Department of Agriculture.
To qualify for a USDA loan, your home must be in a rural area and a single-family unit that you live in as your primary residence. You can’t purchase a working farm with your USDA loan.
Credit scores must be 640 or higher, and your DTI should not be higher than 45% to give you the best chances to qualify.
If you think that a USDA is not the right loan product for you, you can try a conventional loan for your Texas home purchase.
If you don’t meet a USDA or VA loan qualifications, you may want an FHA loan as an alternative.
These loans are backed by the Federal Housing Administration and are ideal for those with low to moderate-income. You can get an FHA loan with as little as a 3.5% down payment, but you need to live in the property you are buying and move within 60 days of closing.
Take note that you need to pay for mortgage insurance until the end of the loan if you put down less than 10% on your FHA loan.
Many home buyers think that conventional loans can only be had with a 20% down payment. This is not the case. Lenders can offer conventional loans with as low as 3% down for first-time home buyers. However, if you apply for a conventional loan and put down less than 20%. PMI or private mortgage insurance is mandatory as protection for lenders if you default on your loan. A good strategy is to talk with your lender and ask them to cancel PMI payments once you reach 20% equity on your home.
If you don’t qualify for a zero down payment loan, you can try a low down conventional home loan by Reliance Financial Group.
If you are in the market for Texas real estate, you probably know that most lenders prefer borrowers that can put down a 20% down payment. It’s good to know that there are options for no or low down payment mortgages available in the market today.
If you are ready to buy, get pre-approved to know how much house you can afford. Contact us at Reliance Financial Group of Austin, TX, and take your first step towards homeownership.
We've been helping customers afford the home of their dreams for many years and we love what we do.
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