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Could Down Payment Assistance Be the Key to Your First Home?

Writer: Gigi PendletonGigi Pendleton
Feb 75 min read



Hands holding a miniature yellow house and a key, suggesting home ownership or real estate concept. White background.
A hand cradles a miniature house, with a key dangling from the fingers, symbolizing the concept of homeownership and real estate investment.

$25,000 Grant for First-Time Homebuyers

Recently, I became aware of a $25,000 grant for first-time homebuyers, and I was skeptical. After talking extensively with a loan officer, I found out the details and, yes, it is real. This is a down payment assistance (DPA) program targeted at first-time homebuyers. It includes a forgivable $25,000 grant that can be used to pay a down payment, to "buy down" the annual interest rate on a home loan, or pay closing costs for a buyer.


Qualification for $25,000 DPA Grant:

Yes, there are qualifications:

  • You have to be a first-time homebuyer (never owned a home or haven't owned a home in the last three years).

  • You have to live in the house you buy as your residence for 5 years (the amount of the grant is forgiven gradually over the 5 years).

  • Your household income must be no more than 80% of the average median income for the county where the house you are buying is located, and you have to include the income for all adults who will be living in the home.

  • You need to have decent credit—not stellar, but decent—like a 580 (on FICO, not Credit Karma).

  • The buyer must contribute a minimum of $500 of their own cash toward the purchase.


Let's look at an example:

A couple with no children makes $65,000 a year (80% of the average median income for Tarrant County). That's $5,400 a month. Assuming they meet the credit score minimum, they need to meet the DTI (Debt to Income). Let's set that at 45%. They have a $250 monthly car payment and credit card debt that requires a minimum of $150 a month. Let's also assume they purchase a $250,000 home with annual property taxes of about $6,000 ($500 a month).

It could work! And it would look something like this:

Expense

Amount

Notes

Interest Rate Buydown (points)

$2,600

Reduce rate to 6.8%

Loan Processing Fee

$750

Mortgage company fees

Title Insurance

$1,481

If buyer pays

Recording Fees

$250


Escrow Fee

$500

Split fee between buyer and seller

Survey (if needed)

$675

If buyer pays

Prepaid Insurance (3 mos)

$600

Estimated at $200 a month

Prepaid Property Taxes

$3,000

Estimated based on 6 months

Subtotal Closing Fees

$9,856

All paid by Grant

Down Payment on Purchase

$15,144

Paid by Grant

Loan Amount

$234,856

$250,000 less down payment of $15,144

Buyer's Cash Contribution

$500

Toward the home purchase

Important Note:

Keep in mind, when homebuyers put an offer on a house, they are typically expected to put earnest money down, usually 1% of the offer price or more. This earnest money usually goes toward the down payment, but theoretically, the application of this grant money could mean a refund to the buyer at closing of part or all of their earnest money.

So, in our example outlined above, the estimated monthly house payment, including $200 a month for homeowners insurance and $500 a month for property taxes, would look something like $2,231. How many of you are paying rent now in excess of $2,231 and owning nothing of the property?

And not only ownership/equity but what about other benefits of home ownership, like tax write-offs for the interest paid on the property.


And yes, there are many nice 3-bedroom/2-bath homes available in the Tarrant County area for $250,000 or less. A February 7th search on the North Texas multiple listing service shows there are over 300 homes active in Tarrant County alone.


Collage of various house exteriors and interiors, featuring lawns, porches, kitchens, and a bathroom. Varied architectural styles.
Affordable living: A showcase of diverse homes in the area, each priced at $250,000 or less.


 

Exactly what is Down Payment Assistance?

Down payment assistance (DPA) programs provide financial help to cover the initial cost of purchasing a home. This can be a huge relief for first-time homebuyers who might not have enough saved up for a down payment.

 

Popular Programs in Texas

 

  1. Texas State Affordable Housing Corporation (TSAHC): TSAHC offers several programs to help Texans buy their first home. Their "Home Sweet Texas" and "Homes for Texas Heroes" programs provide mortgage loans and down payment assistance. You can take an online eligibility quiz to see if you qualify.

  2. My First Texas Home: This program, offered by the Texas Department of Housing and Community Affairs (TDHCA), provides low-interest mortgage loans backed by the FHA, VA, or USDA. It's designed specifically for first-time homebuyers and military veterans.

  3. Local Programs: Many cities and counties in Texas have their own down payment assistance programs. Check with your local housing authority or real estate agent to find out what's available in your area.

 

Typical Qualifying Criteria for First-Time Buyers

 

To qualify for these programs, there are specific criteria you need to meet:

 

  1. Credit Score: Most programs require a minimum credit score of 620. Some programs, like FHA loans, may accept scores as low as 5804. A higher credit score can help you secure better loan terms and lower interest rates.

  2. Debt-to-Income (DTI) Ratio: Your DTI ratio is a measure of your monthly debt payments compared to your gross monthly income. Most programs have a maximum DTI ratio of 45-50% 6. This means your total monthly debt payments, including your mortgage, should not exceed 45-50% of your gross income.

  3. Income Limits: Programs often have income limits based on your area's median income. These limits vary by county and household size3. You can check the specific income limits for your area on the program's website.

  4. Homebuyer Education Courses: Many programs require you to complete a homebuyer education course before you can apply. These courses teach you about the home buying process and help you understand your financial options.


How to Access These Programs

 

  1. Take an Eligibility Quiz: Programs like TSAHC's require you to take an online quiz to determine if you qualify. This is a quick and easy way to see if you meet the requirements.

  2. Attend Homebuyer Education Courses: Many programs require you to complete a homebuyer education course before you can apply. These courses teach you about the home buying process and help you understand your financial options.

  3. Find a Participating Lender: Once you know you're eligible, you'll need to find a lender who participates in the program. Your real estate agent can help you with this step.

  4. Apply for Assistance: Follow the application process for the program you choose. This might include submitting financial documents, attending counseling sessions, and providing other necessary information.

 

 

Additional Resources

For more information, you can visit the TSAHC website or contact your local housing authority. They can provide detailed information about the programs available and guide you through the application process.

 

Owning a home is a big step, and it's great to know that there are resources available to help you get there.


Gigi and the Lang Realty Group are here to support you every step of the way. If you have any questions or need more information, feel free to reach out!

 

The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

 

Sources:


 

 
 
 

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