First-Time Homebuyer Programs: How to Afford Your Dream Home in Dallas

Nothing embodies the American Dream more than homeownership, and the reason is simple. Unlike other major purchases you’ll make throughout life, no investment compares with owning a piece of the neighborhood you occupy.

First-time buyers are a vital segment of the homebuying public. Whether your budget fits a starter home, a fixer upper, or a brand-new house, your initial purchase is the first step toward a lifetime of homeownership.

Since interest rates are still relatively low and Dallas home prices are more stable, now is an ideal time to buy a home. As a first-time buyer, which is defined as anyone who has not owned a home in at least three years, several programs are available that range from lower down payments to down payment and closing cost assistance, depending on your income and individual circumstances.

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How to Get Started

Make sure your financial house is in order. Obtain and monitor your credit report and credit scores to assure you’re in the zone that mortgage lenders expect. If your report is sub-par because of bumps or bruises on credit, you’ll know what credit repair needs to be done to put you in the right position.

Whether you go the conventional, FHA, VA, or program assistance route, lenders typically base loan approval on an applicant’s credit scores, payment history, rent payment history, proof of qualified income, job longevity, debt to income ratio, and available savings to cover the down payment and closing costs, according to First Time Home Buyer Solutions.

Overcoming the Down Payment Hurdle

For most home loans, conventional lenders require a median credit score over 620, an on-time payment history, and two years on the job as well as a 10 percent to 20 percent down payment and an additional 5 percent for estimated closing costs. 

A higher down payment may work well for a seasoned homeowner who’s investing the proceeds of one house into another, but for a first-time homebuyer (who hasn’t won the lottery), the down payment is often the deal breaker. That’s why programs exist for first-time buyers.

Local and State Programs

The Dallas Homebuyer Assistance Program (DHAP) offers help with down payments and closing costs for homebuyers whose earnings are between 60 and 80 percent of the area's median family income. Home purchases must be within Dallas city limits, and homebuyers must be prequalified for a mortgage by an approved participating lender and have taken eight hours of homebuyer education. 

The amount of assistance provided is based on need as determined by the purchase price of the property, mortgage loan amount, down payment requirements and closing costs. There is more information available on the program's website.  

Dallas County Upfront Cost Assistance Program (UPCAP) provides direct loans of up to $7,500 for down payment, closing costs, and pre-paid costs to qualified first-time homebuyers in Balch Springs, Coppell, Farmers Branch, Lancaster, Wilmer, Cedar Hill, Desoto, Glenn Heights, Sachse, Cockrell Hill, Duncanville, Hutchins, and Seagoville, as well as unincorporated areas of Dallas County.

Household earnings cannot exceed HUD median income limits, and the maximum purchase price of a home is based on the Dallas MSA FHA mortgage limit. Aside from the borrower having an acceptable credit history, the housing ratio cannot exceed 35 percent, and the debt-to-income ratios must be 45 percent or less of the gross monthly income.

Texas Department of Housing and Community Affairs (TDHCA), the state’s only housing finance agency, offers low- and moderate-income Texans mortgage loans at 30-year fixed interest rates as well as down payment and/or closing cost assistance through its My First Texas Home program.

Neither the income of a homebuyer or purchase price of a home can exceed the program limits, which are based on county guidelines. Other requirements include a minimum credit score of 620 and a debt-to-income ratio of 45 percent or less.

Besides offering Conventional FNMA HFA Preferred Loans, TDHCA administers government loans through the Federal Housing Administration (FHA), Veterans Administration (VA), and United States Department of Agriculture (USDA). 

Texas State Affordable Housing Corporation (TSAHC) provides mortgage loans, down payment assistance grants, and mortgage credit certificates to eligible first-time homebuyers through two programs. The Homes for Texas Heroes Home Loan Program is available to teachers, fire fighters, EMS personnel, police and correctional officers, and veterans. The Homes Sweet Texas Home Loan Program is available to low-to-moderate income homebuyers in Texas, and its requirements and guidelines are similar to comparable programs.

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