If you’re purchasing a home in Texas on a low-to-moderate income, you should consider the Texas State Affordable House Corporation (TSAHC) assistance programs. Eligible homebuyers who meet the organization’s rules may receive free funding for the down payment. You can also get a 30-year, fixed-rate mortgage with competitive rates and a potential tax credit.
What Is the Texas State Affordable Housing Corporation (TSAHC)?
The Texas State Affordable Housing Corporation is a nonprofit organization dedicated to providing affordable housing opportunities to low- to moderate-income homebuyers in Texas. TSAHC was founded by the Texas Department of Housing and Community Affairs in 1994, and it works with lenders, developers, and local governments to provide affordable housing. Its programs include:
- First-time homebuyer programs
- Loans and down payment assistance
- Existing homeowners programs
- Mortgage credit certificate programs
- Homebuyer education courses
- Affordable multifamily housing development
- Renter programs
- Homes for Texas Heroes program
Who Can Benefit from TSAHC Programs?
TSAHC’s programs are designed to benefit a wide range of individuals and families in Texas who are seeking affordable housing options. These include low- to moderate-income households, including first-time buyers, existing homeowners, and renters. The Homes for Texas Heroes Program includes military and police personnel, educators, healthcare workers, and first responders.
TSAHC Loan Programs
TSAHC works with lenders, developers, and nonprofits to provide fixed-rate loans, down payment assistance programs, second mortgages, and first-time homebuyer mortgage interest tax credits to low- to moderate-income families. The program aims to meet their housing needs by providing funding, education, and mortgage options with competitive rates and 30-year terms.
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Homes for Texas Heroes
The Homes for Texas Heroes loan program offers down payment assistance and home loans to individuals who meet the minimum credit score requirement of 620 and fall within certain income limits. The loan program connects qualified homebuyers with affiliated lenders.
The main factors for determining income and price limits are AMFI (Area Median Family Income), family size, and whether the area is economically distressed. Purchase price limits also depend on the loan type and whether the person applied for Down Payment Assistance (DPA), a special tax credit called a Mortgage Credit Certificate (MCC), or both.
There are two income categories: those at or below 80% AMFI and those above 80% AMFI. The first category can apply for both kinds of assistance, Mortgage Credit Certificates and Down Payment Assistance, while the latter can only apply for DPA.
Professions that qualify for this Texas homebuyer program include:
- Veterans and active military personnel
- Educators and workers in education
- Police officers
- Correctional officers
- Healthcare workers
- Firefighters
- EMS personnel
The Texas Mortgage Credit Certificate is only available to first-time homebuyers. Even if you aren’t eligible for Homes for Texas Heroes, you may qualify for the Home Sweet Texas Home Loan Program. Finally, if you live in one of the targeted areas, you may be able to take advantage of expanded income limits.
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Home Sweet Texas Home
The other TSAHC program is the Home Sweet Texas Home loan program, which offers Texas homebuyers loan options from affiliated lenders, Down Payment Assistance programs, and Mortgage Credit Certificates.
The Home Sweet Texas Home Loan Program is not limited to specific professions. Eligibility is based on income, area, family size, and the home’s sales price, the same factors as Homes for Heroes. Both programs require you to finish a homebuyer education course before you close on your home.
TSAHC Benefits
The organization’s main benefits are its Down Payment Assistance Grants and Mortgage Credit Certificates. We will cover both in more detail.
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Down Payment Assistance Grants
The nonprofit’s DPA programs provide Texas homebuyers access to fixed-rate mortgage loans and down payment funding. The down payment size will significantly affect your mortgage rates and, consequently, your monthly payments, so it’s crucial to consult your lender about the best option. The DPA comes in two primary forms:
- Non-Repayable Grant
- Deferred Forgivable Second Lien Loan
The first DPA program is simple. You won’t have to pay it back if you’re eligible for the grant. However, these are only available for use with government loans, including Federal Housing Administration (FHA) loans, US Department of Agriculture (USDA) loans, and Veterans Administration (VA) loans.
The second type is a loan that must only be repaid if you sell or refinance within three years of purchasing the home. It is available with government loans and the Housing Finance Agency (HFA) Preferred and Advantage Conventional loans.
There is no separate closing cost assistance, but down payment assistance from TSAHC can be used for closing costs, prepaid fees, and other home loan expenses.
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Mortgage Credit Certificates (MCCs) for Tax Reduction
Although the MCC was previously available as a standalone option, it is now only available with DPA for first-time homebuyers. The MCC is a federal tax credit that essentially returns 20% of your annual mortgage interest.
For example, if you paid $8,000 in mortgage interest this year, an MCC will give you a dollar-for-dollar reduction of $1,600 on your federal tax liability. Moreover, once you receive an MCC, it remains effective every year as long as you stay in your home.
Eligibility Requirements for TSAHC Down Payment Assistance Programs
As TSAHC is a nonprofit organization created to help people purchase a first home (or another home if they intend to sell their current one), you cannot use it for a second mortgage or refinancing.
For existing or first-time homebuyers, the requirements for TSAHC DPA programs include:
- A minimum credit score of 620 for government loans;
- A minimum credit score of 640 for HFA conventional loans;
- Possibility to qualify with no credit;
- More lenient limits for people below or at 80% of AMFI;
- No purchase price limits for DPA (if used without MCC);
- Combination of TSAHC programs with other eligible subsidies;
- Completion of the homebuyer education course.
- Grant Amounts and Repayment Options for TSAHC DPA
Both grants and second-lien forgivable mortgages are available in amounts of 2-5% of the total loan amount.
Grants are forgiven six months after the purchase date. Second-lien mortgages are repayable in full if the homebuyer sells, refinances, transfers their rights to their home, fails to occupy the property, or repays the first-lien mortgage for any reason within three years of the closing date. There are no monthly payments connected to the second-lien forgivable mortgage.
Factors Influencing TSAHC Loan Rates
Your TSAHC loan rates will depend on your credit score, the type of loan, and the price of your home. In the TSAHC loan calculator, you can change the loan amount, DPA size, and loan type to see your mortgage rates and monthly payments.
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Minimum Credit Score
As with all mortgage loans and homebuyer programs, people with higher credit scores have lower interest rates as they are perceived as lower-risk borrowers. In addition, those who apply for TSAHC programs and have representative FICO credit scores between 620 and 639 pay an additional 0.50% origination charge.
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Loan Types
All government loans are available as mortgage products with any TSAHC loan program. However, for individuals with credit scores over 640, the organization allows HFA Advantage and HFA Preferred Conventional mortgages to be used with its second-lien forgivable DPA. However, conventional loans typically have higher monthly mortgage payments.
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Home Purchase Price
A higher purchase price will result in higher interest rates. Furthermore, you will need to be eligible for not only the TSAHC program but also the government loan program you are using, which can affect your rates. Also, an additional down payment may be necessary, and its size will affect your rates, as well.
Importance of Contacting a TSAHC-Approved Lender
By choosing a TSAHC-approved lender, you can determine which loan type is best for your financial situation and how much it may cost. As an independent broker, F5 Mortgage can help you find the most affordable lender. Our technology-based, client-first approach will help you apply for F5 Mortgage down payment assistance loans and fulfill your dream of homeownership.
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When a TSAHC Loan Might Be the Right Choice
If you’re a first-time homebuyer in Texas, choosing a TSAHC loan is almost always a good idea. It helps you cover your down payment, closing costs, and other fees, and if you’re eligible, you essentially receive free funding for a part of your loan. The TSAHC program may even save you money on your federal taxes.
The Application Process for TSAHC Loans
The application process is simple. You only need to find an approved lender, and they will work with TSAHC to approve your down payment assistance.
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Take the Eligibility Quiz
If you’re unsure whether you can purchase your Texas home with TSAHC, you can find out within minutes using the TSAHC eligibility quiz.
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Contact a Lender
F5 Mortgage is a broker that can help you with your loan preparation process, offer advice, and help you pick the best Texas home loan program and lender for your needs. You can contact our Home Loan Experts at 1-888-459-0483 or online.
Documents Needed for a TSAHC Loan Application
As a broker with years of experience gathering documents and preparing loan applications, we will help you obtain documentation. You do not need to send anything to the TSAHC yourself, as the organization does not receive documentation directly from borrowers.
All you need to do is take the eligibility quiz and contact us, and we will take it from there.
Final Thoughts
TSAHC is an excellent choice for Texas residents with low and moderate incomes, as it helps you achieve your homeownership goal through a simple, straightforward process. And since you need to find a TSAHC-approved lender, an independent broker like F5 Mortgage is an ideal partner.
We help you find a lender and compare various lenders, review your loan type options, and determine the safest, most affordable loan program.
Contact us today to get started with your homebuying journey!
