TSAHC Down Payment Assistance in Texas

A 620 credit score and a job in Texas might be all you need to get 3% to 5% of your loan amount handed to you at closing, no repayment required. The Texas State Affordable Housing Corporation (TSAHC) runs two of the most accessible down payment assistance programs in the country, and most Texas buyers have never heard of them.

Here is how each program works, who qualifies, and how to stack them with other first-time buyer tools to minimize what you bring to closing.

How TSAHC down payment assistance works

TSAHC provides a 30-year fixed-rate first mortgage through a network of participating lenders, paired with down payment and closing cost assistance. You choose your assistance level: 3%, 4%, or 5% of the total first mortgage amount (TSAHC).

The assistance comes in two forms:

Grant. No repayment, no second lien on the property. The money is yours to keep regardless of when you sell or refinance. Grants typically come with a slightly higher interest rate on the first mortgage to offset the cost.

Forgivable second lien. Structured as a 0% interest deferred loan. If you stay in the home for three years without selling or refinancing, the balance is forgiven entirely. If you sell or refinance before three years, you repay the remaining balance (TSAHC).

The higher the DPA percentage you choose, the higher the rate on your first mortgage. A buyer choosing 3% DPA gets a lower rate than one choosing 5%. Your lender can show you the exact rate sheet for each option.

What the numbers look like

On a $350,000 home with an FHA loan (3.5% down):

DPA option	Assistance amount	Your cash at closing
3% of loan ($337,750)	$10,133	$2,117 remaining
4% of loan	$13,510	$0 (DPA covers down payment)
5% of loan	$16,888	$0 (DPA covers down payment + some closing costs)

At 4% or 5%, most buyers can close with little to no cash out of pocket after the DPA covers the FHA minimum down payment of $12,250 (3.5% of $350,000).

Home Sweet Texas: the general program

Home Sweet Texas is TSAHC’s program for any Texas buyer who meets the income and credit requirements (TSAHC). It is not limited to first-time buyers in all cases.

Who qualifies

• Credit score: 620 minimum (TSAHC)
• Income: At or below 80% of area median family income (AMFI). Limits vary by county. In major metros, limits range from roughly $99,000 in Houston to $123,625 in Austin for a household of one to two people (TSAHC)
• First-time buyer: Required unless purchasing in a federally designated targeted area or qualifying as a veteran
• Primary residence: The home must be your primary residence
• Home buyer education: You must complete a HUD-approved home buyer education course before closing

Loan types available

TSAHC first mortgages can be paired with conventional, FHA, VA, or USDA loans. FHA is the most common pairing because of the 3.5% minimum down payment and more flexible credit requirements.

Homes for Texas Heroes: the profession-based program

Texas Heroes offers the same DPA structure (3-5% grant or forgivable second lien) but targets specific professions (TSAHC). The income limits tend to be higher, and the first-time buyer requirement is waived for qualifying veterans.

Eligible professions

• Professional educators: Full-time public school teachers, teacher aides, school librarians, school counselors, and school nurses
• First responders: Police officers, firefighters, and EMS personnel
• Public security officers and corrections: County jailers, juvenile corrections officers, and state correctional officers
• Veterans and active military: Currently serving or honorably discharged
• Nursing and allied health faculty: Educators in nursing and healthcare programs

(TSAHC)

If you work in one of these fields, the Heroes program is almost always the better option. It uses the same lender network and the same DPA mechanics, with potentially more favorable terms.

The $500 MCC bonus

Texas Heroes applicants who combine down payment assistance with a Mortgage Credit Certificate save an additional $500 at closing (TSAHC). The MCC itself is a separate federal tax credit worth up to 40% of your annual mortgage interest, capped at $2,000 per year. On a $337,750 loan at 6.5%, that is roughly $2,000 per year in tax credits for the life of the loan.

Mortgage Credit Certificates: the overlooked tax benefit

An MCC is a dollar-for-dollar federal income tax credit on a portion of your mortgage interest. TSAHC offers MCCs as a standalone product or paired with DPA.

For first-time buyers meeting income requirements (set at 115% AMFI per federal guidelines), the MCC provides:

• Credit rate: Up to 40% of annual mortgage interest paid
• Annual cap: $2,000 per year
• Duration: The life of the loan (as long as you live in the home as your primary residence)

On a $337,750 loan at 6.5%, you pay roughly $21,900 in interest the first year. A 40% MCC credit on that interest equals $8,760, but the $2,000 annual cap limits the actual credit to $2,000. Still, $2,000 per year in tax credits for 30 years is $60,000 in lifetime value.

You can use the MCC alongside the standard mortgage interest deduction. The MCC reduces your tax liability directly (a credit, not a deduction), which is more valuable dollar for dollar.

MCC vs. standard deduction: which matters more

Most buyers taking the standard deduction ($14,600 single, $29,200 married filing jointly in 2026) do not benefit from itemizing mortgage interest. The MCC sidesteps this entirely because it is a credit, not a deduction. You take the standard deduction and the MCC credit on the same return. That makes the MCC uniquely valuable for buyers in the income range TSAHC serves, where the standard deduction typically exceeds itemized deductions.

How the MCC interacts with your lender

Your lender must issue the MCC at closing. Not all lenders are approved to issue MCCs through TSAHC, so confirm this capability when choosing a lender. The lender files the certificate with the IRS, and you claim the credit on Form 8396 each year.

How to apply

The process runs through TSAHC’s participating lender network, not through TSAHC directly.

1. Take the eligibility quiz at tsahc.org to confirm you meet income and program requirements
2. Contact a participating lender from TSAHC’s approved list. Not every lender offers TSAHC loans, so confirm before you apply
3. Complete home buyer education through a HUD-approved course (online options available, typically $50 to $100)
4. Get pre-approved with your lender, who will lock your TSAHC rate and DPA level
5. Close on your home with the DPA funds applied at the closing table

The whole process mirrors a standard mortgage application. The main difference is that your lender submits the DPA reservation through TSAHC’s system, which locks the assistance before you close.

Get pre-approved through Chestnut in under two minutes to see your rate options before applying for TSAHC assistance.

Stacking TSAHC with other Texas programs

TSAHC programs can often be combined with other assistance:

• Federal tax credits: The MCC stacks with the standard mortgage interest deduction
• Seller concessions: Sellers can contribute up to 3% (conventional) or 6% (FHA) toward closing costs, on top of TSAHC DPA
• Lender credits: A slightly higher rate in exchange for lender-paid closing costs can further reduce your out-of-pocket

On a $350,000 FHA purchase with 5% TSAHC DPA ($16,888), a 3% seller concession ($10,500), and a modest lender credit ($1,500), you could close with negative out-of-pocket costs, meaning the excess gets applied to prepaid items and reserves.

A real stacking scenario

Source	Amount	Covers
TSAHC DPA (5% of $337,750 loan)	$16,888	Down payment ($12,250) + $4,638 toward closing costs
Seller concession (3% of $350,000)	$10,500	Remaining closing costs, prepaids, escrow
Lender credit (0.125% rate bump)	$1,500	Additional closing cost offset
MCC tax credit (annual)	$2,000/yr	Ongoing tax savings after closing
Total assistance at closing	$28,888
Your cash at closing	$0	Excess applied to prepaid reserves

This is not a hypothetical. Buyers in Houston, San Antonio, and Dallas close with this structure regularly. The key is working with a lender who understands TSAHC layering and can structure the loan estimate to maximize each source.

Compare rates from Chestnut and 100+ lenders to see how TSAHC assistance fits your specific purchase.

Common mistakes buyers make with TSAHC

Choosing the highest DPA without checking the rate impact. The 5% option gives you the most cash at closing, but it comes with a higher first mortgage rate. Run the monthly payment at each DPA level. Sometimes the 3% option with a lower rate costs less over five years than the 5% option.

Not shopping lenders within the TSAHC network. TSAHC sets the DPA terms, but individual lenders set their fees. Origination fees, processing fees, and underwriting fees vary across participating lenders. Get quotes from at least three.

Skipping the MCC. The Mortgage Credit Certificate is free to apply for and saves $2,000 per year in taxes. Some buyers do not realize they qualify or assume it is too complicated. It is not. Your lender handles the filing.

Waiting too long. TSAHC programs are subject to funding availability. When funding runs out for a given fiscal period, the program pauses until the next allocation. Apply early in the funding cycle when rates and DPA levels are at their best.

What TSAHC does not cover

• Investment properties or second homes: Primary residence only
• Jumbo loans: TSAHC loan amounts follow FHA, VA, and conventional limits
• High-income buyers: If your household income exceeds your county’s AMFI threshold, you will not qualify
• Repeat buyers (Home Sweet Texas): Unless purchasing in a targeted area or qualifying as a veteran

More Texas first-time buyer guides

• Texas Closing Costs 2026: Fees and Savings for a complete breakdown of what you pay at closing in Texas
• 6-Month Credit Sprint: 620 to 700 in Texas for how to hit the 620 minimum and beyond
• What Waiting Until 2027 Costs Homebuyers for the dollar cost of delaying your purchase
• Is Now a Good Time to Buy a House? for a five-signal framework to evaluate your timing

Frequently Asked Questions

How much down payment assistance does TSAHC provide?

TSAHC offers 3%, 4%, or 5% of your total first mortgage amount as down payment and closing cost assistance. On a $337,750 loan, that ranges from $10,133 to $16,888. You choose the level that fits your needs, with the understanding that higher DPA percentages come with a slightly higher interest rate on the first mortgage.

Do I have to repay TSAHC down payment assistance?

If you choose the grant option, no repayment is required. If you choose the forgivable second lien, the loan is forgiven after three years as long as you do not sell or refinance. If you sell or refinance before three years, you repay the remaining balance.

What credit score do I need for TSAHC programs?

The minimum credit score for both Home Sweet Texas and Homes for Texas Heroes is 620. A higher score may qualify you for better interest rates on the first mortgage.

Do I have to be a first-time buyer to qualify?

For Home Sweet Texas, yes, unless you are purchasing in a federally designated targeted area or you are a qualifying veteran. For Homes for Texas Heroes, the first-time buyer requirement is waived for veterans and active military.

Can I combine TSAHC assistance with an FHA loan?

Yes. FHA is the most common loan type paired with TSAHC programs. The TSAHC DPA can cover the 3.5% FHA minimum down payment, and in many cases, a portion of closing costs as well.

What is the income limit for TSAHC programs?

Income limits vary by county and household size. Most Texas counties set limits between $70,000 and $123,625 for households of one to two people. Take the eligibility quiz at tsahc.org for your specific county limit.

Sources

1. TSAHC, “Loans and Down Payment Assistance”
2. TSAHC, “Homes for Texas Heroes Program”
3. TSAHC, “First Time Home Buyer Grants”
4. TSAHC, “New Income Limits Allow More People to Qualify”
5. TSAHC, “Homebuyers and Renters”
6. Bankrate, “Texas Mortgage Rates”