Home Buyer Loan Programs Guide

Federal Loan Programs

FHA Loans (Federal Housing Administration)

FHA loans are government-backed mortgages designed to help first-time homebuyers and those with less-than-perfect credit achieve homeownership. These loans are insured by the Federal Housing Administration, which allows lenders to offer more flexible qualifying requirements than conventional loans. FHA loans have helped millions of Americans purchase homes who might not otherwise qualify for traditional financing.

One of the most attractive features of FHA loans is the low down payment requirement, making homeownership accessible sooner. While FHA loans require mortgage insurance premiums, the trade-off of easier qualification standards and lower down payments often makes them an excellent choice for buyers just starting their homeownership journey or those rebuilding their credit.

Key Features:

• Minimum down payment as low as 3.5% with a credit score of 580 or higher
• Down payment of 10% required for credit scores between 500-579
• More lenient credit score requirements compared to conventional loans
• Debt-to-income ratio can be up to 43% (sometimes higher with compensating factors)
• Both fixed-rate and adjustable-rate mortgage options available
• Upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount
• Annual mortgage insurance premium (MIP) required for the life of the loan if down payment is less than 10%
• Maximum loan limits vary by county (check your specific area)
• Property must be primary residence and meet FHA property standards
• Assumable loans (buyer can take over your FHA loan when you sell)
• Gift funds allowed for down payment and closing costs
• Reference: https://www.hud.gov/buying/loans

Conventional Loans (Fannie Mae/Freddie Mac)

Conventional loans are mortgages not insured or guaranteed by the federal government, instead conforming to standards set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that purchase these loans from lenders. These loans typically offer competitive interest rates and flexible terms for borrowers with good credit and stable income. Conventional loans are the most common type of mortgage in the United States and offer several advantages for qualified buyers.

For borrowers who can meet the credit and down payment requirements, conventional loans often provide the best overall value, especially for those who can put down 20% or more to avoid private mortgage insurance. These loans offer flexibility in property types and loan amounts, making them suitable for a wide range of homebuyers from first-timers to seasoned investors.

Key Features:

• Minimum down payment as low as 3% for first-time homebuyers (Fannie Mae HomeReady and Freddie Mac Home Possible programs)
• Income Level Limit as low as $72,300 for Fannin County for HomeReady product. 
• Standard minimum down payment of 5% for most borrowers
• Private mortgage insurance (PMI) required if down payment is less than 20%
• PMI can be removed once you reach 20% equity in your home
• Typically requires credit score of 620 or higher (higher scores get better rates)
• Debt-to-income ratio typically should not exceed 43-45%
• Conforming loan limits for 2025: $806,500 in most areas (higher in expensive markets)
• Can be used for primary residence, second home, or investment property
• Both fixed-rate (15-year, 20-year, 30-year) and adjustable-rate options
• May offer better interest rates than FHA for borrowers with excellent credit
• More stringent appraisal and property condition requirements than FHA
• Down payment can come from savings, gifts, or grants
• Reference: https://www.fanniemae.com/ and https://www.freddiemac.com/

USDA Loans (United States Department of Agriculture)

USDA loans are zero-down-payment mortgages guaranteed by the U.S. Department of Agriculture to promote homeownership in eligible rural and suburban areas. These loans are designed for low-to-moderate income borrowers who meet income eligibility requirements and are purchasing in USDA-designated areas. Despite the “rural” designation, many suburban areas surprisingly qualify for this program.

The USDA loan program offers some of the most favorable terms available, including no down payment requirement and competitive interest rates. If you’re looking at properties outside major metropolitan areas and your income falls within the program limits, a USDA loan can be an excellent path to homeownership with minimal upfront costs. The income limits and property location requirements make this program particularly valuable for families looking to settle in smaller communities.

Key Features:

• 0% down payment required – 100% financing available
• Property must be located in USDA-eligible rural or suburban area (check eligibility map)
• Income limits apply – household income cannot exceed 115% of area median income
• No maximum purchase price, but home must be modest in size and amenities
• Credit score typically needs to be 640 or higher for streamlined processing
• Property must be primary residence only (no investment properties or second homes)
• Upfront guarantee fee of 1% of the loan amount
• Annual guarantee fee of 0.35% of the loan balance
• Debt-to-income ratios typically capped at 41-46%
• Both fixed-rate and adjustable-rate mortgages available
• Repairs and improvements can sometimes be rolled into the loan
• Gift funds permitted for closing costs
• Seller can contribute up to 6% toward buyer’s closing costs
• Reference: https://www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-guaranteed-loan-program

VA Loans (U.S. Department of Veterans Affairs)

VA loans are mortgage benefits available to eligible veterans, active-duty service members, and surviving spouses, guaranteed by the U.S. Department of Veterans Affairs. This program was created to help those who have served our country achieve homeownership with favorable terms and minimal out-of-pocket costs. VA loans are widely considered one of the best mortgage options available, offering significant advantages that aren’t available through any other loan program.

The VA loan benefit is one of the most powerful financial tools available to military families, offering the possibility of homeownership with no down payment and no ongoing mortgage insurance. For eligible borrowers, VA loans typically offer lower interest rates than conventional loans and more flexible credit requirements. This benefit can be used multiple times throughout your lifetime, making it valuable for both first-time buyers and those who have owned homes before.

Key Features:

• 0% down payment required – 100% financing available
• No private mortgage insurance (PMI) required regardless of down payment
• One-time VA funding fee (typically 2.3% for first-time use with zero down, can be financed)
• Funding fee waived for veterans receiving disability compensation
• Competitive interest rates, often lower than conventional loans
• No maximum loan amount (though VA County Loan Limits may apply above $806,500)
• More lenient credit requirements – no minimum credit score set by VA (lenders typically want 620+)
• Seller can pay all buyer’s closing costs plus up to 4% in concessions
• Can be used for primary residence only
• Loan is assumable by qualified buyers
• Closing costs are limited and regulated by VA
• No prepayment penalties
• Must obtain Certificate of Eligibility (COE) to verify service requirements
• Can be used multiple times (entitlement restores after paying off previous VA loan)
• Available for purchase, refinance, and home improvement
• Reference: https://www.va.gov/housing-assistance/home-loans/

Texas-Specific Programs

Texas State Affordable Housing Corporation (TSAHC)

Homes for Texas Heroes

The Homes for Texas Heroes program provides down payment assistance to qualifying professionals who serve Texas communities, including teachers, firefighters, law enforcement, EMS personnel, corrections officers, and veterans. This program was created to recognize and support those who dedicate their lives to public service by making homeownership more affordable and accessible. TSAHC partners with participating lenders throughout the state to offer this valuable benefit.

This program can be combined with other loan types (FHA, VA, USDA, or conventional) to provide meaningful down payment and closing cost assistance. For eligible heroes, this can mean the difference between renting and owning, or can help accelerate the home buying timeline by reducing the amount needed for upfront costs. The program is funded by the state and availability can vary, so it’s important to work with a TSAHC-approved lender.

Key Features:

• Down payment assistance up to 5% of the loan amount
• Available to teachers, firefighters, EMS, law enforcement, corrections officers, veterans, and their surviving spouses
• Must be employed in Texas in an eligible profession
• Can be used with FHA, VA, USDA, or conventional loans
• Property must be located in Texas and be primary residence
• Must be first-time homebuyer or not have owned a home in the past 3 years
• Income limits apply and vary by county and household size
• Purchase price limits apply based on county
• Funds provided as a second lien with 0% interest
• Loan is forgivable over time (typically forgivable after 5-10 years of occupancy)
• Must complete homebuyer education course
• Must use a TSAHC-approved lender
• Reference: https://www.tsahc.org/homebuyers/homes-for-texas-heroes

Texas State Affordable Housing Corporation (TSAHC)

Home Sweet Texas Home Loan

The Home Sweet Texas Home Loan program offers competitive interest rate mortgages combined with down payment assistance to qualified first-time homebuyers throughout Texas. This program is designed to make homeownership affordable by not only providing a competitive rate but also helping with one of the biggest hurdles to homeownership – the down payment. TSAHC works with a network of approved lenders across the state to deliver this program.

This comprehensive program addresses both monthly affordability through competitive rates and upfront affordability through down payment assistance. For first-time buyers struggling to save for a down payment while paying rent, this program can be transformative. The combination of assistance and favorable terms makes this one of the most popular state programs for new homebuyers in Texas.

Key Features:

• Competitive 30-year fixed interest rate mortgage
• Down payment assistance of 5% of the loan amount
• Must be first-time homebuyer (or not owned a home in past 3 years)
• Property must be in Texas and serve as primary residence
• Income limits vary by county and household size
• Purchase price limits vary by county
• Available for FHA, VA, USDA, or conventional loan types
• Down payment assistance provided as a second lien with 0% interest
• Second lien is forgivable after 10 years of occupancy
• Must complete homebuyer education course before closing
• Credit score requirements vary by loan type (minimum 640 typically)
• Must use a TSAHC-approved participating lender
• Funds are limited and available on a first-come, first-served basis
• Reference: https://www.tsahc.org/homebuyers/home-sweet-texas-loan-program

My First Texas Home Program

The My First Texas Home program, administered by the Texas Department of Housing and Community Affairs (TDHCA), provides low-interest mortgage loans and down payment assistance to eligible first-time homebuyers across Texas. This program is specifically designed to help Texans achieve homeownership who might struggle to qualify for conventional financing or save enough for a down payment. The program has helped thousands of Texas families purchase their first home by reducing both upfront costs and monthly payments.

This program stands out by offering both a below-market interest rate AND down payment assistance, creating a powerful combination for affordability. The reduced interest rate means lower monthly payments over the life of the loan, while the down payment assistance helps buyers get into homes sooner. For eligible first-time buyers, this program can save tens of thousands of dollars over the life of the loan compared to conventional financing.

Key Features:

• Below-market fixed interest rate mortgage (typically 0.5-1% below market)
• Down payment assistance available (typically 3-5% of loan amount)
• Must be first-time homebuyer or not have owned a home in past 3 years
• Property must be located in Texas and be primary residence
• Income limits apply based on county and household size (generally 115% of area median income)
• Purchase price limits vary by county
• Available with 30-year fixed-rate mortgages
• Can be used with FHA or conventional loan types
• Minimum credit score typically 640
• Must complete homebuyer education course before closing
• Down payment assistance provided as a second lien (terms vary – may be forgivable or deferred)
• All household members age 18+ must meet first-time homebuyer requirement
• May include additional tax credits in some targeted areas
• Must use approved participating lender
• Reference: https://www.tdhca.state.tx.us/homeownership/fthb/

Texas Bootstrap Loan Program

The Texas Bootstrap Loan Program, administered by the Texas Department of Housing and Community Affairs (TDHCA), provides low-interest loans to very low-income individuals in rural areas of Texas who are willing to contribute “sweat equity” by providing substantial labor in the construction of their home. This unique program is designed for those who may not qualify for traditional financing but are willing to invest their time and effort into building their own home. It’s an opportunity for families to achieve homeownership through hard work and determination.

This program fills a crucial gap for rural Texans whose income levels make traditional homeownership difficult but who have the skills and willingness to contribute labor. By providing the materials and professional services while the family provides labor, the program dramatically reduces the overall cost. This innovative approach has helped hundreds of rural Texas families build modest, decent homes that they might never have been able to afford otherwise.

Key Features:

• Low-interest loans for families in rural Texas counties
• Designed for very low-income families (typically 60% or below area median income)
• Borrower must contribute at least 65% of the labor to build the home (sweat equity)
• Funds can be used for materials, labor that homeowner cannot provide, and lot purchase
• Maximum loan amount typically $75,000 (varies by county)
• Interest rate typically around 3% fixed
• Property must be in a rural area (outside city limits or in towns under 25,000 population)
• Loan term up to 30 years
• No down payment required beyond sweat equity contribution
• Property must meet minimum property standards and local building codes
• Technical assistance provided to help families through the construction process
• Family must occupy the home as primary residence
• Homebuyer education required
• Must demonstrate ability to repay the loan
• Reference: https://www.tdhca.state.tx.us/homeownership/bootstrap/

Texas Mortgage Credit Certificate (MCC) Program

The Texas Mortgage Credit Certificate (MCC) program, offered by the Texas State Affordable Housing Corporation, provides a dollar-for-dollar federal tax credit to eligible homebuyers, allowing them to reduce their federal income tax liability and keep more money in their pocket each month. Unlike a tax deduction, which reduces your taxable income, a tax credit directly reduces the amount of tax you owe. This means more take-home pay every month, which can help you qualify for a larger mortgage or simply make your monthly budget more comfortable.

The MCC is particularly valuable because it provides benefits for the life of the mortgage as long as you remain in the home as your primary residence. Over the years, the cumulative tax savings can add up to tens of thousands of dollars. This program can be combined with most loan types and is an underutilized benefit that can significantly improve the affordability of homeownership for middle-income Texas families.

Key Features:

• Provides a federal tax credit equal to 50% of the mortgage interest paid annually (up to $2,000 per year)
• Credit is claimed annually on federal income tax return using IRS Form 8396
• Remaining mortgage interest can still be claimed as a tax deduction
• Valid for the life of the mortgage as long as home remains primary residence
• One-time fee typically around $575-$875 depending on lender
• Can be combined with other down payment assistance programs
• Available to first-time homebuyers (or not owned home in past 3 years)
• Income limits apply based on county and household size
• Purchase price limits vary by county
• Property must be in Texas and serve as primary residence
• Can be used with FHA, VA, USDA, or conventional loans
• Must use an MCC-approved lender
• Homebuyer education course required
• Benefits realized monthly through increased take-home pay (adjust W-4 withholding)
• Reference: https://www.tsahc.org/homebuyers/mortgage-credit-certificate-program

City and County Local Programs

Many Texas cities and counties offer their own homebuyer assistance programs tailored to local needs and funded through local housing authorities. These programs vary widely by location but typically provide down payment assistance, closing cost assistance, or favorable loan terms to income-eligible buyers purchasing within the jurisdiction. Local programs are often the most generous because they’re funded to address specific community housing needs and workforce development goals.

If you’re planning to buy in a specific Texas city or county, it’s absolutely worth researching what local programs might be available. Major cities like Houston, Dallas, San Antonio, Austin, Fort Worth, and El Paso all have established programs, but even smaller counties sometimes offer assistance. These programs can often be stacked with state programs for even greater benefits, though you’ll need to check specific program rules.

Key Features:

• Programs vary significantly by city and county
• Common offerings include down payment assistance grants or forgivable loans
• Often provide $5,000 to $25,000 or more in assistance
• Typically targeted to low-to-moderate income households
• Often prioritize specific professions (teachers, police, firefighters, city employees)
• May target specific neighborhoods or revitalization areas
• Some programs offer property tax abatements or exemptions
• Usually require primary residence and minimum occupancy period (3-5 years typical)
• May require homebuyer education courses
• Can often be combined with state and federal programs
• Funding is usually limited and offered on first-come, first-served basis
• Application processes vary by locality
• Major Cities with Programs: Houston (HFHD), Dallas (DHA), San Antonio (SAHA), Austin (AHFC), Fort Worth, El Paso
• Contact your local housing authority or visit city housing department websites for specific programs
• Reference: Contact your specific city or county housing authority for local programs